Under the shadow of looming local gas caps, this week Santos (ASX:STO) became the first of Australia’s big oil and gas companies to drop its December 2022 quarter report.

And yes, the results are pretty much what you’d expect from the last reporting period of a year where strong energy prices dominated global markets.

The company reported sales revenue of US$1.9bn ($2.75bn) in the quarter, taking its total revenue for the year up by 65% over the previous year to a record of US$7.8bn.

Free cash flow of US$3.6bn for the year is more than double it generated in 2021 despite a dip in fourth quarter production to 25.6 million barrels of oil equivalent due to reduced domestic gas volumes in Western Australia following unplanned maintenance at John Brookes.

None of this is particularly surprising given the outstanding performance that was reported by global supermajors such as Exxon and Chevron.

Some standout points are the company preparing to resubmit the drilling activity environment plan for its Barossa project and ongoing progress with its Moomba CCS (carbon capture and storage) project.

Drilling at Barossa was suspended following a successful legal challenge brought by an indigenous group and the subsequent squashing of Santos’ appeal.

Meanwhile, the company’s Moomba CCS project is now 40% complete while trials of direct air capture technologies in the Cooper Basin are expected to begin during the first half of 2023.

CCS has been widely touted as a key plank in decarbonising the oil and gas industry, though the problems faced by Chevron’s CCS efforts over at the giant Gorgon LNG project raises some queries about just how viable it actually is, so expect Santos’ attempt to be closely watched.

Gas cap whinging

The record results reported by the Adelaide-headquartered company (and the similarly impressive performances its peers are likely to bring to the table) do raise a question of just how much of their whinging is based on genuine concern about the potential impact on investment in new projects and how much is about preserving their record profits.

Being the paragons of virtue that have made the name Stockhead, so well regarded from The Vatican to Vaga Vaga (that’s latin for Wagga Wagga), it’s in our nature (and our contract) to both trust in the Goodness of Man and suspect the worst in everyone.

So there’s most likely a little bit of both in their positions.

That is to say, there is genuine concern from at least some parts of the industry that the $12 per gigajoule price cap might be insufficient for companies to make investment decisions.

With inflation hitting, cost blowouts are a very real concern especially for new gas projects which require extensive infrastructure – processing plants, pipelines and with decarbonisation on the agenda, possibly CCS or even, ironically, renewable energy to power said infrastructure.

Of course critics of this approach – such as the Institute for Energy Economics and Financial Analysis (IEEFA) – claim that even the $12/GJ gas cap is too high and that the industry can make a profit even at $7/GJ.

At the other side of the spectrum, there is certainly at least some interest from gas companies to preserve their ability to sell gas without pesky gas caps. And why not? Strong financials will look good to shareholders and at the end of the day, that’s the stakeholder that public listed companies have primary responsibility to.

So yes, a fair bit of the whinging about the price caps has been made due to the interest in keeping super profits because why not? And to be entirely fair, companies and their shareholders should be rewarded for risking their investments even if the green lobby feels otherwise.

At the same time, should there be some limits? Absolutely.

Overly high gas prices do no one any favours, raising costs for consumers of all stripes which in turn contributes to inflation, which impacts everyone, and makes it even more likely that a further acceleration towards renewables will happen – not something the gas industry will like to see.

That’s not to say that the gas cap as it stands is perfect. There are undoubtedly ways to improve it, though that’s something beyond the pay grade of this poor journalist.

Sun’s no longer shining on giant NT solar project

Speaking of renewables, there was certainly much gnashing of teeth after the giant Sun Cable project was put into administration following apparent disagreements between its billionaire backers Andrew Forrest and Mike Cannon-Brookes.

On paper, it sounds promising.

Take the harsh sunlight baking the Northern Territory to power a 20 gigawatt solar farm backed by batteries and send that electricity to Singapore, which as this poor journalist knows from first-hand experience is tremendously energy hungry for its size.

Even this colossal project will be enough for just 15% of the first world island-state’s energy needs from 2028.

That this will abate an estimated 8.6 million tonnes of CO2 per annum would also be something to cheer about.

However, there are several problems with the concept, first being the pain-inducing estimated cost of more than $30bn, which will be a tough one to swallow even for the likes of Forrest and Cannon-Brookes.

Ongoing maintenance of the 4,200km long cable will also be a logistical nightmare.

There’s also the simple fact that the longer the cable, the more electricity you will lose. Let’s just say 4,200km is a very long distance.

And those factors have certainly added up for Forrest’s Squadron Energy, which says it no longer considers the project’s original concept to be commercially viable.

So is this the end of the project and does it spell doom for similar renewable energy ideas?

The answer is nay and nay, according to Squadron, which still believes there is a future in Sun Cable, but that it would be a lot more realistic as a green hydrogen and ammonia producer. A smooth segue indeed.

And while Sun Cable’s entry into administration is a setback for renewables, it is temporary at best.

The push towards renewables will continue as decarbonisation becomes more urgent, however some pie in the sky concepts might need to be re-examined and either scaled-back or repurposed in order to make clearer strategic sense to this poor, skeptical journalist.