Australia court ruling on Santos raises risks for offshore gas projects

A sign for Santos Ltd is displayed on the front of the company's office building in the rural township of Gunnedah, located in north-western New South Wales in Australia, March 9, 2018. Picture taken March 9, 2018. REUTERS/David Gray/File Photo
  • Santos to seek new permit to resume gas drilling
  • Court ruling could slow other offshore projects
  • Santos, Woodside shares end lower

MELBOURNE, Dec 2 (Reuters) - Australia's Federal Court rejected on Friday an appeal by Santos Ltd (STO.AX) to resume drilling on its $3.6 billion Barossa gas project off northern Australia after indigenous groups raised objections, potentially delaying other offshore projects.

Three Federal Court judges ruled that Santos had not consulted all the indigenous people on the Tiwi Islands that should have been consulted for its environmental plan, backing a challenge brought by a member of the Munupi clan.

The court's decision means all offshore developers will have to consult a wide range of groups, including those with cultural interests, when seeking regulatory approvals, which could slow projects in the works such as Woodside Energy Group's $12 billion Scarborough gas development and linked Pluto LNG plant expansion.

"There is now the risk of more delays and obstacles in the progression of important energy projects," Australian Petroleum Production and Exploration Association Chief Executive Samantha McCulloch said in a statement.

The court's ruling hit the companies' shares. Santos closed down 3.8% and Woodside ended 2.6% lower in a broader market (.AXJO) that fell just 0.7%.

Santos on Friday said it would apply for fresh approvals for its biggest project in line with the court's order.

"Santos does not anticipate any material cost or schedule impact, and first gas from the Barossa Gas Project remains on track to be delivered in the first half of 2025," the company said in a statement.

The court backed a challenge led by Munupi clan member Dennis Tipakalippa, who contended that the Barossa project posed a risk to sacred sites and spiritual connection to Sea Country north of the Tiwi Islands in the Timor Sea.

"Our sea is like our mother - we are part of the sea and the sea is part of us. Santos and every other gas company must take note that this is our country and we must be consulted," Tipakalippa said in a statement after the court handed down its decision.

The Barossa gas field is about 140 km north of the Tiwi Islands.

Santos had to suspend drilling on the project in September after a judge found that the environmental approval by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) for the Barossa permit was invalid as it had not properly consulted the Munupi clan about the project.

Tipakalippa's lawyer told the court Santos should have gone beyond the Tiwi Land Council to talk to people who had a specific interest in Sea Country, just as Santos had talked to groups that had fishing and tourist interests.

Santos said it had consulted all the relevant persons who might be affected by its drilling and that it would be too hard to consult all indigenous groups with connections to the area.

But in their decision, the three Federal Court judges concluded: "In this case, we consider it clear that Mr Tipakalippa and the Munupi clan had interests ... that required them to be consulted."

Credit Suisse analyst Saul Kavonic said the court's decision "may cause a material delay to Barossa, as a new consultation process is undertaken and a new environmental plan is submitted and assessed by NOPSEMA".

A lawyer at the Environmental Defenders Office, Alina Leikin, said her Tiwi Island clients including Tipakalippa do not want drilling in the Timor Sea, but that would be a matter for the consultation process.

"The community are hopeful that the regulator and Santos will understand and appreciate the depth of their concern and their desire to protect their Sea Country and won't go ahead with this drilling," Leikin told Reuters by phone from the Tiwi Islands.

Reporting by Sonali Paul; Editing by Muralikumar Anantharaman and Edmund Klamann

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