We took a first look at the Australian oil and gas company Santos. The company’s strategy is underpinned by the continued production of oil and gas into the 2040s (up to 36% expansion relative to FY22), and creating an Energy Solutions division focusing on CCS, DACs, carbon offsets, and clean fuels like hydrogen and synthetic gas.

Key findings

• Santos’ target of a 30% reduction in Scope 1 and 2 equity emissions by FY30, positions it behind ambition than European peers (-44 to -70%).  

• While its CCS plans sounds ambitious, the initial focus on capturing waste gas can only address up to 6% of it’s emissions (~2 MtCO2 pa). Santos’ future ambition of 10 Mt p.a storage capacity by FY30 is indicative of a strategy which is driven by additional revenue from third parties rather than decarbonisation.

• Without a robust plan for emission avoidance, Santos’ proposed allocation of 15-25% of Group capex on CCS hubs and nature based offsets to 2030, combined with the company’s upper guidance of 36% growth in oil and gas, could result in an increase in scope 3 emissions. 

• Santos must make a clearer distinction between efforts to reduce its own emissions and the pursuit of new business opportunities to assess the progress of its transition strategy.