Santos share price holds tight amid new project heat

ASX 200 investors are mulling over the potential impacts of the Labor government's new carbon emissions reduction plans on Santos' multi-billion dollar gas projects.

Key points
  • The Santos share price has regained some small early losses
  • The Labor government’s new carbon reduction plan could add costs and delays to two of Santos' major gas projects
  • The ASX 200 oil company’s Narrabri gas project in New South Wales is said to have the support of incoming premier Chris Minns’ Labor government

The Santos Ltd (ASX: STO) share price has regained some small earlier losses and is trading right where it closed yesterday.

Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas company closed yesterday trading for $6.95. Shares are currently changing hands for, well, $6.95. The ASX 200 is down 0.3% at this same time.

Santos drew our attention today as ASX 200 investors mull over the potential impacts of the Labor government's new carbon emissions reduction plans on the energy giant's multi-billion dollar new gas projects.

Putting those concerns aside, the Santos share price should be receiving some modest tailwinds from a 0.1% increase in the price of Brent crude oil. Brent is currently trading for US$78.65 per barrel.

An oil refinery worker checks her laptop computer in front of a backdrop of oil refinery infrastructure.

Image source: Getty Images

Santos share price in focus as new gas projects take heat

The Santos share price could be a bit volatile amid media reports on two of the company's major expansion projects.

Yesterday, The Australian reported that incoming premier Chris Minns' Labor government is expected to fast-track Santos Narrabri gas project in New South Wales.

According to Santos, the $3.5 billion project could supply half of the state's gas requirements by 2025.

Santos has reportedly already spent some $1.5 billion to bring Narrabri online.

One of the sticking points to date has been the construction of the Hunter Gas Pipeline. The 833-kilometre pipeline will pump gas from the project to the east coast domestic market and potentially connect with the Wallumbilla Gas Supply Hub in Queensland.

The Perrottet government declared New South Wales part of the pipeline critical infrastructure last year. And it looks like the state's new government will follow through with that, likely offering some upcoming tailwinds for the Santos share price.

According to The Australian, Minns met Santos CEO Kevin Gallagher before the election, and Minns was reportedly eager to see the project completed.

Santos has yet to comment on whether the Labor-Greens deal on the safeguard mechanism will impact the Narrabri project, as it awaits some clarity on the new rules.

What other gas projects could face increased opposition?

In other news that could throw up some headwinds for the Santos share price, The Australian Financial Review reported this morning that the Santos Barossa gas project, located in the Timor Sea, could face some of the biggest hits from the new safeguard mechanism.

That's because the $5.8 billion project has a high CO2 content of around 18%. And the CO2 levels are reported to be a critical yardstick employed in the new emissions reduction deal.

And this is likely to see costs rise and share prices of the big energy companies potentially take a small haircut.

According to Credit Suisse energy analyst Saul Kavonic, "Let's be clear, there will be a financial impact from the safeguard mechanism from a cost perspective for the upstream industry,"

Kavonic estimated the impact on the Santos share price could be as much as 20 cents per share. That would represent a 2.9% reduction from the current price.

Santos share price snapshot

As you can see in the chart below, the Santos share price has seen some big swings over the past year amid fast-rising and retracing oil and gas prices. So far in 2023, Santos shares are down 2%.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Man holding a calculator with Australian dollar notes, symbolising dividends.
Energy Shares

If I invest $15,000 in Woodside shares, how much passive income will I receive in 2027?

Woodside could be a source of large passive income in 2027.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

How many Woodside shares do I need to buy for $1,000 per month of passive income?

Find out what you could earn off your oil and gas investment.

Read more »

Engineer in the oilfield wearing red helmet and work clothes, with pumpjack and wellhead in the background.
Energy Shares

Woodside Energy vs Ampol: Which ASX oil stock looks better this week?

Woodside Energy and Ampol both offer franked income, but one oil stock looks better value to me right now.

Read more »

An oil worker in front of a pumpjack using a tablet.
Broker Notes

2 ASX energy companies Macquarie says will outperform

There's still some value in the volatile energy sector, the broker says.

Read more »

Engineer at an underground mine and talking to a miner.
Broker Notes

Up 42% and paying a 7% dividend yield, should I buy New Hope shares today?

A leading expert delivers his outlook for New Hope’s outperforming shares.

Read more »

A man scratches his head in confusion.
Energy Shares

This ASX energy stock just crashed 12%. Here's what's gone wrong

Investors are heading for the exits.

Read more »

A woman wearing a black and white striped t-shirt looks to the sky with her hand to her chin, contemplating buying ASX shares.
Energy Shares

Boss Energy vs Paladin Energy: Which ASX uranium stock wins?

Boss Energy and Paladin Energy are ASX uranium leaders. Here’s which I’d buy based on value, growth, and latest performance.

Read more »

A mining worker clenches his fists celebrating success at sunset in the mine.
Broker Notes

Macquarie says this ASX uranium producer has more than 15% upside

A new mine design has impressed the broker.

Read more »