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South Korean financier pauses loan for multi-billion dollar Barossa gas project

Environmentalists and traditional owners in the Northern Territory have claimed a win in their bid to derail one of the biggest recent projects in the nation’s oil and gas sector.

Key points:

  • Santos plans to develop a $4.7 billion gasfield in the Timor Sea north of Darwin
  • But an international financier has delayed a decision on whether to invest in a joint venture company
  • Anti-gas groups believe the delay is linked to environmental concerns with the project

Larrakia and Tiwi Islander traditional owners, along with an international coalition of anti-gas groups, are targeting plans for a $4.7 billion Barossa gas development, to be built and operated by Santos, in waters about 300 kilometres north of Darwin.

In legal action filed in a South Korean court last month, traditional owners sought to prevent two of that country’s export credit agencies from funding the offshore gasfield with almost $1 billion in loans.

Some elders say they do not support a pipeline, which is proposed to run through a habitat protection zone, as part of the project.

One of the agencies in the legal action, the government-backed Export-Import Bank of Korea or KEXIM, has now delayed a decision on whether to invest in Santos’s South Korean joint venture partner, energy company SK E&S.

An aerial view of Cape Van Diemen on Melville Island, part of the Tiwi Islands
The project is being challenged by traditional owners from the Tiwi Islands, north of Darwin, and environmental groups.(Supplied: Rebecca Parker)

“Projects like Barossa often need that type of public money in order for private financiers to come in and support the project,” Dina Rui from Jubilee Australia, one of three groups campaigning against the project, said.

“Without that type of public money from South Korea, it could very well mean that the future of Barossa is on shaky ground.

Loan approval ‘directly linked’ to project future

The size of the loan being considered by KEXIM, alongside the reasons a decision was delayed, are not known.

But environmental groups suspect the pause is linked to environmental concerns they have been raising with South Korean stakeholders.

South Korean campaign group Solutions for our Climate said it was “very rare” for a project to be considered by a KEXIM committee and not be approved.

“Given that KEXIM’s credit expansion committee includes the President of the bank and is conservative with its decision-making, the investment delay indicates that KEXIM views this project as significantly risky — although they are not being upfront about this concern with the public,” climate finance researcher Dongjae Oh wrote in response to questions over email.

The plans for the Barossa development include building a floating production facility, underwater production wells, and a gas pipeline linking the Timor Sea to an LNG processing facility on Darwin Harbour.

Santos's Darwin LNG plant is seen from overhead at dusk.
Santos says the project will create up to 350 ongoing jobs including at LNG processing facilities on Darwin Harbour.(Supplied: Santos Limited)

The project has been linked to Australia’s gas-led recovery from COVID-19 and has been anticipated to provide about 350 ongoing jobs once production begins in 2025.

Mr Oh said two other investors had already approved their financing for the project, so KEXIM’s decision was “directly linked to the future of the Barossa project”.

“Currently, South Korea’s K-SURE and Japan’s JBIC have approved their financing, so the project’s financing hinges on KEXIM,” he wrote.

Tibby Quall, a Larrakia elder from Darwin, said his family was never consulted about the project.

“It’s a huge development and I have a lot of concerns for the harbour and the pristine areas of our country,” he said.

“We’ve only got a small harbour, but we want to keep everything pristine for everybody.”

Tibby Quall looks seriously at the camera. Behind him is the ocean.
Dangalaba Larrakia elder Tibby Quall fears the project will damage the harbour.(ABC News: Michael Franchi)

Further approvals required, regulator says

Santos declined to comment while the matter was before the courts.

The resources giant is the lead company and has a 50 per cent stake in the Barossa project, which reached a final investment decision last year, but is not involved in the legal action.

Contacted after lawyers acting on behalf of traditional owners filed for an injunction in March, the company said it had “all the necessary approvals in place.”

But gas industry regulator National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) said further approvals were required before the project could move to production.

The company has previously said it had consulted with stakeholders.

“As is the case for all of our projects, we undertake consultation with all key stakeholders where they receive detailed information about the project,” a spokesperson previously told the ABC.

Santos has previously said it planned to investigate options for carbon-neutral LNG production through processes such as carbon capture and storage and carbon credits.

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