Major financial institutions cut ties with Santos’ Barossa gas project

A major international bank and a foreign investor have cut their ties with Santos’ $5.8 billion Barossa gas project in the Timor Sea, in a move activist groups hope will heap pressure on Australia’s big four banks to follow suit.

BNP Paribas, the world’s ninth-largest bank, headquartered in France, is no longer acting as a financial adviser for the energy giant, while The Export-Import Bank of Korea (KEXIM) has confirmed it has not renewed its loans to SK E&S, the oil and gas subsidiary of Santos’ South Korean Partner SK.

KEXIM’s two-year loans to the Barossa project lapsed at the end of last month and SK E&S did not seek an extension, according to a response from the bank to a question from South Korean parliament.

The same document also shows the Korea Trade Group (K-Sure), the South Korean government’s export credit agency, in January withdrew insurance needed to underwrite SK E&S’ investment in the project.

Together with KEXIM, the institutions provided loans and guarantees of up to $US700 million for SK, one of South Korea’s largest family-run conglomerates, which owns 37.5 per cent of Barossa.

BNP Paribas said it was no longer involved in the financing of the Barossa gas project, in an email to South Korean group Solutions for Our Climate and this masthead. BNP Paribas’ role as a financial adviser involved co-ordinating banks and financial terms with the project owners.

“The financial adviser mandate BNP Paribas had at one point of time has expired,” the bank wrote.

The moves are not a huge blow to Santos, which prevailed in the Federal Court in January when a judge ruled that arguments the proposed pipeline would damage Tiwi Islanders’ Sea Country and anger two creatures of their Dreaming stories had not been persuasive.

Justice Natalie Charlesworth said the Environmental Defenders Office, which represented three Tiwi traditional owners opposed to the 262 kilometre pipeline, coached Indigenous witnesses and relied on “confection” in some of its evidence. Santos on Wednesday told the Federal Court the EDO should face “cost consequences” for its behaviour.

SK E&S, KEXIM and Santos were contacted for comment but did not respond.

The energy giant ploughed ahead with laying the pipe following the decision in January after spending $US10 million ($15.7 million) a month to hire a drilling rig idled by an earlier junction.

In an update to investors in February, Santos chief executive Kevin Gallagher reported the Barossa gas project was now 67 per cent complete and that the first gas was expected in the third quarter of 2025.

Market Forces senior gas campaigner Rachel Deans said the big four Australian banks “must listen to these warning bells and cut ties with Santos” following BNP Paribas and KEXIM’s latest decision. NAB, Westpac and ANZ declined to comment.

In a statement, the Commonwealth Bank said it was committed to supporting Australia’s transition to net-zero by 2050.

”Our environmental and social framework and our underlying environmental and social policy set out our approach, and we use our sector-level financed emissions targets to steer our portfolio in these sectors over time,” a CBA spokesman said.

“Decisions on whether we provide financing to a client are based on a range of factors, including credit and other group policy requirements, such as the E&S framework.“

Australia is the largest exporter of gas, and the Albanese government has embraced the commodity as a critical one as the country transitions to net-zero.

Resources Minister Madeleine King last month released the federal government’s future gas strategy, which identifies LNG as a critical part of the energy landscape beyond 2050, and pledges to deliver affordable gas to customers for decades to come. “New sources of gas supply are needed to meet demand during the economy-wide transition,” the strategy said.

In a report published earlier this month examining the future of the Australian gas sector, the Institute for Energy Economics and Financial Analysis questioned the commercial viability of local gas producers competing against lower-cost producing countries, such as Qatar, in a global market. It also found global LNG markets were heading towards a supply glut due to unprecedented increases in supply from low-cost producers and weak demand growth.

The institute’s lead gas analyst, Joshua Runciman, said BNP Paribas’ decision to not support the Barossa gas project followed its recent withdrawal from the proposed Papua LNG project.

“Looking at the numbers, Santos’ Barossa project faces the risk of poor financial returns,” Runciman said. “The costs of the Barossa project have already escalated and Santos will face additional costs to offset the very high CO2 content of the Barossa field.”

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