Santos share price holds tight amid new project heat

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

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%.

The post Santos share price holds tight amid new project heat appeared first on The Motley Fool Australia.

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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.

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