Australian oil and gas exploration and production company Santos has signed an agreement with Japanese gas utility company Toho Gas to investigate the potential for producing carbon-neutral e-methane in South Australia’s Cooper Basin.

The collaboration supports Santos Energy Solutions' low-carbon fuels ambitions and could lead to the export of carbon-neutral e-methane, made by combining green hydrogen with carbon dioxide (CO₂) obtained from carbon capture of industrial emissions or direct air capture in a circular economy.

Santos says the advantage of e-methane is that it has the same properties and chemistry as natural gas, and can use existing gas pipelines, liquefied natural gas (LNG) facilities (including liquefaction, ships, tanks and receival terminals) and gas distribution networks.

Therefore, e-methane could be a carbon-neutral substitute for natural gas, saving trillions of dollars in energy transition costs as a drop-in fuel to existing industrial processes and technologies, including for power generation, high-temperature heating and chemicals manufacturing. It’s also a direct substitute for use in appliances such as gas stoves and barbecues, the company adds.

E-methane has potential to provide relatively low-cost decarbonisation, including for hard-to-abate sectors where alternative technologies are not yet proven or economically viable, Santos states.

Santos CEO and MD Kevin Gallagher says the collaboration with Toho Gas will focus on the Cooper Basin, which is shaping up as a large-scale decarbonisation and low-carbon fuels hub with potential access to a vast CO₂ source from industrial emissions or direct air capture, and which has vast renewable resources for making green hydrogen with electrolysers.

“Japan’s sixth Strategic Energy Plan is targeting 1% e-methane in existing gas infrastructure by 2030 and 90% by 2050. This is a huge opportunity for Santos and South Australia. The Cooper Basin, leveraging world class renewables and carbon storage resources, and Santos’ existing infrastructure position, is extremely well placed to meet Japan’s e-methane demand from 2030,” he points out.

“We’re very excited to be working with Toho Gas and building the trade, technology and investment partnerships that will put Santos in an excellent position to support Japan’s decarbonisation through our LNG, carbon capture and storage and low-carbon fuels businesses, including the potential for e-methane production.

“If we progress to the next stage, this collaboration could potentially extend the life of the Cooper Basin for another 55 years, keeping it at the centre of a modern Australian energy industry and supporting hundreds of well-paying, skilled and secure jobs for another three generations and beyond,” Gallagher adds.