Oil and gas giant Santos on Monday said that it had secured a USD$150 million (AUD$228 million) loan to progress its carbon capture and storage (CCS) project, which will capture carbon dioxide created as a by-product in the production of gas and then store it underground.

Santos anticipates the Moomba project will have the capacity to store up to 1.7 million tonnes of CO2, “equivalent to delivering – every year – about 28 per cent of the total emissions reduction achieved in Australia’s electricity sector last year” according to the company.

The firm – which is the largest in the state per the South Australian Business Index – hopes its CSS project will contribute to the world hitting net zero by 2050.

Santos CEO and managing director Kevin Gallagher welcomed the support of the banks and said “this indicated their recognition of CCS as a vital tool in reaching the world’s net-zero ambitions”.

“The strong support Santos has received is underpinned by the progress we are making on our Climate Transition Action Plan that is focused on reducing our own emissions and those of our customers, as well as on developing low-carbon fuels as customer demand evolves,” he said.

“The… 1.5-degree scenarios assumes Asian gas demand will increase slightly out to 2050 (compared to 2020) with some scenarios assuming demand increase of 40 per cent or more. Abating the emissions associated with natural gas is critical to reduce greenhouse gas emissions and tackle climate change, and our Moomba CCS project will help achieve this.

“It is encouraging that financiers are recognising the important role of CCS in abating emissions as we transition to net zero.”

Santos said the first phase of the Moomba CSS project was now 80 per cent complete, with per tonne lifecycle breakeven storage costs being targeted at about US$24.

This will “make it one of the lowest-cost CSS projects globally and very competitive with other carbon-abatement technologies and opportunities”.

“The Cooper Basin will play a significant role in the energy evolution as it transforms into a decarbonisation hub with the potential to produce low-carbon fuels and offer CCS services which could reduce emissions from critical fuels such as LNG and from hard-to-abate sectors such as steel, aluminium and cement,” Santos said.

It follows the signing of a memorandum of understanding (MoU) yesterday between Santos and Sanjeev Gupta’s Liberty Primary Metals – a subsidiary of GFG alliance – to explore gas supply and CSS opportunities.

Santos said the MoU would “support the green steel transformation of the Whyalla steelworks”, while CEO Gallagher said the supply of abated natural gas was “aimed at assisting the GFG Alliance in its decarbonisation pathway”.

“We’ve been a gas supplier to Whyalla for many years and we’re pleased to be working with GFG on its green steel journey,” he said.

“We’re seeing strong interest in abated natural gas domestically and internationally.

“This MOU is great news for the Upper Spencer Gulf and South Australia because industries like the Whyalla steelworks rely on affordable energy combined with decarbonisation to grow into the future – keeping jobs, skills and business opportunities here in the region to support vibrant local communities for decades to come.”

Also announced today, the state government and GFG Alliance will explore a deal for the latter to use hydrogen offtake from a publicly funded power station.

Premier Peter Malinauskas was pleased to have interest in a supply deal.

“Global demand for green steel is already rising and is forecast to surge in the coming years,” he said.

“Whyalla will be perfectly positioned to capitalise on this opportunity.”

– with AAP