Santos delays Australia's $1.9bn Dorado oil project

Australian oil giant Santos has postponed its A$3bn ($1.87bn) Dorado oil and gas project in Western Australia, triggering a significant 23% drop in the share price of junior partner Carnarvon Energy, Reuters reported on January 21. The decision also caused a 2.2% decline in Santos’ shares. Carnarvon and Taiwan’s state-owned CPC each hold a 10% stake in the project, with Santos owning the remaining 80%.

Santos announced the deferral following a reassessment of development plans, which included pausing the acquisition of a production and storage vessel and delaying engineering and design work. A spokesperson for the company told Reuters that the joint venture agreed to revisit the Dorado development concept after further evaluation of Bedout Basin resources.

The company reaffirmed its focus on shareholder returns and prioritisation of the Barossa and Pikka gas projects for 2025. Santos CEO Kevin Gallagher has consistently emphasised the importance of shareholder value, reiterating this stance at a November 2024 investor briefing and earlier in August.

Santos has repeatedly delayed taking a final investment decision (FID) on Dorado, which is one of Australia’s biggest oil finds in decades, comparable in production capacity to the Sangomar and Trion projects led by Santos’ rival Woodside. It is estimated to hold around 158mn barrels of recoverable oil. The company’s loss of interest in the project comes as it repositions its strategy to put greater focus on natural gas development.

In November 2023, CEO Kevin Gallagher warned that he did not anticipate a project FID anytime soon, citing regulatory uncertainty caused by legal interventions by climate activists. This poses significant investment risks, he said.

The fresh delay presents additional challenges for Carnarvon Energy, which has faced scrutiny from shareholders over its valuation. Reports in 2023 indicated that Carnarvon had engaged bankers to explore potential bids for the company or its assets. CPC has not commented on the development.

Separately, Santos admitted to a condensate spill at the Varanus Island Marine Terminal in March 2022, where approximately 25,000 litres leaked due to structural damage in a pipeline. The company was fined $10,000 and ordered to pay an additional $9,700 in costs.