Natural gas demand to remain strong past 2050 despite net zero plans, Santos CEO says

(Bloomberg) – Demand for natural gas will remain strong despite government and company efforts to zero out emissions by mid-century, according to Kevin Gallagher, the head of Santos Ltd.

Gallagher is under pressure to deliver on his ambitious strategy to boost production by more than 50% by the end of the decade to cement Australia’s second-largest fossil fuel producer as a major international energy provider. The company earlier Wednesday said its major Barossa liquefied natural gas project is almost 80% complete and on track to produce first gas next year.

“Santos is developing a product the world needs,” Gallagher, the chief executive officer of the Adelaide-based company, said in an interview on Bloomberg Television. “We see demand for gas — LNG in particular — remaining very strong beyond 2050.”

The company’s shares fell as much as 5.8% Wednesday, their biggest drop in more than six months, after it reported an 18% decline in first-half underlying profit from the year before, missing estimates. Output fell 2%.

Nevertheless, Gallagher’s upbeat outlook helped to convince the board to underpin an interim dividend of 13 cents per share, higher than the same period last year. The producer is coming out of a capital-intensive phase over the next year or so, which should generate more free cash flow driven by stronger production, he said.

Santos has rebuffed a takeover attempt from larger Australian rival Woodside Energy Ltd. at the end of 2023, while Saudi Aramco and Abu Dhabi National Oil Co. both looked at a buyout this year. Gallagher said on an analyst call that Santos’ “world class LNG portfolio” would be attractive to other investors.

“They know the phone numbers, so if they want to come and talk to us, they know how to get us,” he said.