Santos has signed a memorandum of understanding (MOU) with one of South Australia’s biggest commercial industrial gas users, Liberty Primary Metals Australia Pty Ltd (part of GFG Alliance), to enter into discussions for gas supply combined with carbon capture and storage (CCS) opportunities to support the green steel transformation of the Whyalla steelworks.

The Whyalla Steelworks is a fully-integrated operation, starting with the mining of raw materials and ending with the distribution of finished steel products.

Approximately 1.2 million tonnes of raw steel is produced in the steelworks each year, with about 65% of that product then transferred by rail to the steelworks Market Mills in billet form for further processing. The balance of the steel is then converted to finished products in the Whyalla Rolling Mill. These products service the construction and rail transport industries.

GFG Alliance purchased the Whyalla Steelworks out of administration in 2017. GFG Alliance has invested more than $200 million in the Whyalla Steelworks and mining operations since acquisition.

Santos Managing Director and CEO Kevin Gallagher said the MOU to supply abated natural gas is aimed at assisting the GFG Alliance in its decarbonization pathway as it transitions to a Direct Reduction Plant (DRP) in Whyalla that can process local magnetite ore to produce low-carbon iron. The DRP will initially use a mix of natural gas and green hydrogen as the reducing agent, with the aim of fully transitioning to green hydrogen as it becomes available at scale.

GFG Alliance signed an agreement with the South Australian Government to explore opportunities for the supply of hydrogen from its 250MW electrolyzer in Whyalla to support the transformation to green iron and steel.

The MOU includes a joint pre-feasibility study of CCS opportunities aimed at abating emissions from the Whyalla iron and steel works. This could see GFG Alliance become the first domestic third-party customer for Santos’ flagship carbon capture and storage project at Moomba.

Separately, Santos announced it has secured finance for the company’s share of the US$220 million Moomba carbon capture and storage (CCS) project in South Australia.

The financing, with a five-year tenor and totalling US$150 million, will be used to cover project costs incurred to date and to draw down upon as the project progresses to first injection targeted for mid-2024.

The first phase of the Moomba CCS project is now 80% complete and is targeting about US$24 per tonne lifecycle breakeven storage costs, which will make it one of the lowest-cost CCS projects globally and very competitive with other carbon-abatement technologies and opportunities.

The project will have capacity to store up to 1.7 million tonnes of CO₂ per year (with actual volumes depending on availability of CO₂ for storage). That’s equivalent to delivering—every year—about 28% of the total emissions reduction achieved in Australia’s electricity sector last year.

Santos Managing Director and CEO Kevin Gallagher applauded the GFG Alliance for its green steel ambitions and said that natural gas combined with CCS could provide an accelerated, affordable decarbonisation pathway while green hydrogen is being developed at scale.

Santos is a global energy company with operations across Australia, Papua New Guinea, Timor-Leste and the United States.