Santos: A Risk Financiers Can’t Afford

Santos has faced sustained opposition from some Traditional Owners, local communities, human rights groups, and national and international environmental organisations over its oil and gas expansion projects in recent years.

The company has been in the spotlight recently over environmental breaches following revelations about a design fault leading to a major methane leak at the company’s DLNG export terminal. This follows a litany of other environmental issues over the years, including an oil spill that allegedly killed dolphins, contamination of aquifers and a separate 250,000 litre oil spill.

Despite the issues outlined above, many of Santos’ shareholders have failed to escalate their stewardship actions, and have even regressed in their efforts to rein in the company’s oil and gas growth plans. Many banks have continued to provide finance to Santos despite the company’s oil and gas expansion, which may undermine those banks’ ability to meet their own commitments to goals of the Paris Agreement. These failures send a clear message to Santos that it won’t be held accountable for pursuing business plans that are incompatible with global climate goals.

Institutions financing Santos face serious reputational risks that must be managed appropriately. Current lenders and investors must effectively engage with Santos to drive a science-based, Paris-aligned, low-risk transition strategy. Banks should not provide or arrange any new finance for Santos while its strategy remains out of line with accepted pathways to meet global climate goals. Investors must take escalatory steps to stop the company’s reckless oil and gas expansion strategy.

The following key findings paint a picture of the growing risks faced by Santos and its financial backers:

LNG exports prove costly for Australian customers

1. Santos continues to prioritise liquefied natural gas (LNG) exports, contributing to a near quadrupling of gas prices on Australia’s East Coast since 2015, based on data from the Australian Energy Market Operator (AEMO). With the commencement of the Queensland LNG export industry, “wholesale gas prices on the east coast have become linked to LNG export prices since 2015.” Since 2000, Australia’s LNG exports have exploded, increasing more than 10 times (935%). In the early 2000s, LNG exports only accounted for ~34% of Australia’s gas production; this has risen to consistently more than 80% in recent years.
2. Over the past eight years, Santos’ Gladstone LNG (GLNG) export facility in Queensland drained more than eight times more gas for export (1,274 PJ) than the 155 Petajoules (PJ) it sold into the domestic market, according to the ACCC. GLNG’s net withdrawal of 1120 PJ is also eight times greater than all Australian household gas use in FY24.

Santos’ LNG expansion strategy is based on questionable assumptions

3. LNG remains highly volatile with Asian LNG prices increasing by 26 times from 2020 lows to 2022 highs. This extreme volatility contributed to energy crises in countries currently dependent on imported gas, including Bangladesh, Vietnam and Pakistan raising questions of Santos’ Asian LNG demand growth claims. Pakistan, for example, has accelerated its shift to renewable energy, cancelling 21 LNG cargoes from Eni and 24 cargoes from Qatar, while importing nearly $1 billion of batteries and over $7 billion of solar panels over the past five years.
4. Santos’ Climate Transition Action Plan continues to promote a high-cost uneconomic carbon trading hub vision in which carbon dioxide (CO2) is transported from Asia and stored in Australia via carbon capture and storage (CCS). For example, Santos’ customers in Japan and South Korea would face total carbon costs of $32 billion to capture, return and store the CO2 produced from the Barossa gas project back to Australia, based on carbon transport cost estimates from Wood Mackenzie. The cost of locking away this CO2 represents more than 10 times the capital expenditure Santos spent constructing the project.

Tax minimisation erodes gas industry social licence

3. Market Forces analysis finds Santos paid just $33 million in corporate income tax in Australia over the past 10 years, despite earning over $41 billion in revenue from its Australian operations. The corporate income tax paid by Santos is equivalent to just 0.08% of total realised sales revenues.

4. Based on Market Forces research, in 2025 Santos’ average realised sale price across commodities was $71.03 per barrel of oil equivalent (boe) for its Australia operations. Yet it paid just $3.17 per boe in royalties (4.5% of total sales revenue) and just $0.30 per boe in corporate income tax (less than 0.5% of total sales revenue). On average over the past 10 years Santos paid just over 3% of its realised price revenue in royalties and income tax.

Santos’ oil and gas expansion strategy is at odds with climate science

3. Since 1991 Santos’ emissions (scope 1-3) totalled 947Mt of CO2-e. This is equivalent to running Australia’s largest coal-fired power plant for 70 years.
4. Santos is actively trying to grow its oil and gas production by between 15-38% over the next five years, despite there being no room for new oil and gas developments in a world in which global warming is limited to 1.5°C in line with the Paris Agreement. Santos’ oil and gas production growth estimates to 2030 are higher than the global growth rates projected under a pathway aligned with 3°C of warming (the International Energy Agency’s current policy settings (CPS) scenario).

Ballooning risks from Beetaloo, Papua LNG gas expansion projects

3. Santos continues to push ahead with its Beetaloo Sub-basin development, a massive new LNG export project which Santos explicitly hopes will “fill all of our LNG operations or assets in Australia for decades to come”. The emissions from burning the gas from just this one project in the Beetaloo could release more than 285 Mt CO₂-e. This represents more than 12 years of the Northern Territory’s total emissions.

4. Santos continues to progress the Papua LNG project despite the submission of the first formal complaint to the Equator Principles detailing urgent concerns about the potential climate, biodiversity and human rights impacts of the proposed project. Banks and export credit agencies have increasingly recognised the risks of the project, with a total of 29 “now ruling out financing” Papua LNG.

By providing financial support to Santos, financial institutions face substantial reputational risks. Banks and investors should seriously consider these recommendations:

For banks

1. Banks already exposed to Santos should engage with Santos to manage its strategic, reputational, climate-related financial, regulatory and legal risks.
2. Banks should not provide or arrange any new finance (including project finance loans, corporate finance loans or bonds) for Santos until those risks are properly managed.
3. Banks should rule out new project or corporate financing of Santos until the company can provide a credible 1.5°c transition strategy that ceases oil and gas growth.

For institutional investors

1. Institutional investors, including large asset managers and pension funds, should engage with Santos to manage its strategic, reputational, climate-related financial, regulatory and legal risks.
2. Institutional investors should:
   
   
   1. engage with Santos about the viability of Santos’ growth projects, particularly operations in the Beetaloo basin and the Papua LNG project (FID expected mid-2026), and
   2. call for Santos to provide a credible 1.5°C climate transition pathway that is not entirely dependent on uneconomic and unrealistic CCS as a service business model.
3. Institutional investors should publicly question why:
   
   
   1. Santos has shifted back to a pro-growth strategy and how Santos will show capital discipline under a 1.5°C climate transition scenario,
   2. Santos’ CFO has resigned, and
   3. three bidders for the company have walked away after completing further due diligence on the company.