The CEO of Santos says investment in carbon capture and storage (CCS) is critical to keeping money in fossil fuels. 

Santos CEO Kevin Gallagher has spoken ahead of the planned start of a carbon project in South Australia.

He says there is a major competitive advantage for Santos, and for Australia, in establishing a new, large-scale industry that produces carbon offsets.

These credits will be needed by countries that lack Australia’s capacity to use vast tracts of land and depleted oil and gas fields to store carbon.

“Australia has always relied on foreign investment in our resources sector, and if we are to continue to attract that investment, then we need to be making the most of our competitive advantage in carbon storage and leading the world on decarbonisation and carbon markets,” he told The Australian Financial Review.

“Carbon capture and storage is more than an opportunity, I believe it is essential for companies like Santos to have in our portfolio.”

Santos will soon make its final investment decision on the 1.7 million tonnes a year Moomba carbon capture and storage project.

It says this project will be the lowest-cost worldwide, but it is waiting on a government ruling to make CCS eligible to generate Australian Carbon Credit Units.

It also still has to register its $210 million project with the Clean Energy Regulator.

However, Wood Mackenzie analyst Shaun Brady says that as there is no clear and robust carbon regulatory framework in Australia, the pace of progress in decarbonisation is under threat, and may deter overseas investors from CCS projects here.

“Companies locally and around the globe have signalled an appetite to invest in technologies that will enable the oil and gas industry to decarbonise, including CCS/CCUS,” Mr Brady told reporters. 

The ‘U’ in CCUS is for ‘utilisation’, and refers to methods of using captured CO2 in substances such as plastics, concrete or biofuel.

“Whether Australia can succeed in attracting this investment rests on whether the government can put in place the policy framework needed for it to make commercial sense,” Mr Brady said.

The Morrison government says CCS is one of its five priority technologies to help the country reduce emissions. 

The International Energy Agency has also singled out CCS processes as a central way to help reach net zero emissions.

Green groups often oppose CCS because of its patchy track record and because it helps prolong the use of fossil fuels.