The costs of a controversial gas project off the Northern Territory coast will increase by between $500 million and $987 million over five years due to new Australian climate policy, according to estimates by The Australia Institute.

The Barossa gas project, proposed by Santos for waters 285km north of Darwin, is particularly affected by recent changes to Australia’s Safeguard Mechanism policy due to its status as a new export gas project and its high reservoir CO2 content.

Key points:

• Barossa is expected to produce 1.4 tonnes of CO2e per tonne of liquified natural gas (LNG) produced, triple the level of peer projects.
• Safeguard Mechanism reforms require new projects to offset 100% of reservoir emissions from commencement. The Barossa field has a higher reservoir CO2 than any other gas field in Australia.
• Safeguard Mechanism reforms also require non-reservoir emissions to decline by 4.9% per year. This applies to around 3.3 million tonnes per year for Barossa and related LNG plant emissions.
• At current Australian offset prices ($38 per tonne) these measures will cost $500 million to 2030, and at the proposed carbon cap price of $75 per tonne would cost $987 million to 2030.

“Big new fossil fuel projects like Barossa should not go ahead due to climate impacts and that is starting to be factored in by Australia’s climate policy,” said Rod Campbell, Research Director at The Australia Institute.

“There is much debate about how many fossil fuel projects the new rules will stop and how many will they facilitate, but what is clear is that the Barossa project is particularly affected by the changes.

“As a new project, aimed entirely at export markets and with particularly high reservoir emissions, Barossa is the poster child of the kind of project the new Safeguard Mechanism should stop.

“Our estimated additional costs of between $500 million and almost $1 billion are significant for any project, let alone one trying to compete in a decarbonising world.

“Importantly, our estimates stop at 2030 reflecting the timing of climate goals, but the actual costs will continue into the future.

“This should make it clear to investors that new, highly polluting projects are particularly risky at this point in time.”