Santos boss Kevin Gallagher will take Feds ‘at their word’ on future of contracts under gas reservation policy

Santos boss Kevin Gallagher is confident the company’s existing contracts will be protected under a new Federal Government reservation scheme despite “contradictory” draft guidelines released on Monday.

Gas exporters will be forced to keep 20 per cent of their output for local markets under a policy announced earlier this month to target a forecast shortage of the fuel on the east coast.

Yet there’s uncertainty as to exactly how the new rules will be applied.

Monday’s guidelines said sales agreements that are already locked would not be affected by the scheme — though media reports have questioned whether the full volume of Santos’ contracts will be covered.

Mr Gallagher told investors on Tuesday that he will take the Government “at their word” existing contracts would be protected.

But he acknowledged the guidelines were not clear.

“We are comforted by what every minister has said that existing contracts will be protected,” Mr Gallagher said.

“As for the document released yesterday, I think it raises more questions than it gives answers.

“(It) has a lot of contradictory statements.”

Industry lobbyists from Manufacturing Australia have pushed for the scheme in the hope of securing lower gas prices it has labelled “wildly uncompetitive”.

The Coalition promised a similar reservation rule ahead of the 2025 election.

Yet the oil and gas industry warns a poorly-designed policy will damage investment by artificially forcing down prices and making smaller projects unaffordable.

Renewed interest in local Australian oil production will also be a major tailwind for Santos developing a project in WA.

Mr Gallagher also spruiked the potential Bedout Basin oil precinct off WA’s coast — including the $3 billion Dorado project — claiming it “looks great” and “stacks up economically”.

The company will make the fields a top exploration target alongside investment priorities in Alaska, Papua New Guinea and the Beetaloo Basin on the east coast.

It marks a significant reversal from early last year when the $25 billion company parked the Dorado oil project north of Port Hedland amid a clampdown on spending.

Dorado was given primary regulatory approval in 2023. It was discovered by ASX junior Carnarvon Petroleum and Santos owns 80 per cent. Carnarvon shares lifted 4 per cent on Tuesday amid optimism for the project.

Santos said three exploration wells will be drilled in the Bedout in 2027.

Dorado was dubbed a high rate of return project with “potential to provide increased energy security”.

A price of about $US90 per barrel in recent days was up about 50 per cent since the start of the year due to disruption from the latest Middle East war.

That’s flowed through to push up costs at the petrol bowser while sparking worries about sufficiency of supply.

Industry has seized on the uncertainty to push plans for boosting oil investment and Prime Minister Anthony Albanese pledged to fund feasibility works on a new refinery.