Ground Breakers: Nickel Industries goes renewable on power deal and Santos approves Alaskan oil development

Nickel Industries invests in power deal to bring solar to Indonickel plants
Santos announces FID on Pikka oil field after energy price run spurs ~US$1.3b profit

It’s well known that we have a shortage of battery quality nickel going around, with Indonesia looming as the main source of growth for an industry already grappling with the need for ESG friendly supply chains.

The issue with that is that Indonesian environmental standards can be spotty, and the nickel pig iron produced in factories from its large reserves of low grade nickel laterite tends to come in with a far higher emissions bill than traditional nickel sulphide mines like those found in WA.

That has led some NGOs to get on the backs of Tesla, and other EV makers to turn their backs on Indonickel.

ASX-listed, Indo-focused Nickel Industries (ASX:NIC) is trying to live in both worlds, operating within Indonesia while trying to convince investors it is maintaining Australian ESG standards.

To that end, NIC is making a big investment in renewable energy in a bid to reduce the carbon intensity of its rotary kiln electric furnaces in the Morowali Industrial Park, where the company produces NPI from its Hengjaya, Ranger and upcoming Oracle plants.

Binding term sheet

NIC announced today that it has signed a binding term sheet with local Indonesian company PT Sumber Energy Surya Nusantara to install a 200MWp and 20MWh solar and battery project to supply power at Morowali, crystallising an MoU signed with SESNA in January.

It follows a previous smaller installation that has been commissioned at the company’s Hengjaya mine, which it says will reduce diesel consumption by 31Ml over its 25 year life.

NIC will acquire the power on a long term deal at costs that are lower than current fossil fuel generation and expected to remain constant over the life of the project.

“We are very pleased to announce the next step in our collaboration with SESNA to develop the first renewable energy production within IMIP, which reflects the Company and Tsingshan’s commitment to a material reduction in its greenhouse gas emissions,” NIC, which supplies nickel to Chinese stainless steel giant Tsingshan, said.

“The fact that Nickel Industries is not required to provide any funding for the project is very attractive, as is the stable nature of the pricing which will be fixed over the 25-year contract period and which is currently lower than existing power costs.

“Nickel Industries is continuing to expand its renewable energy exposure and this binding term sheet, along with the MoU signed with Quantum in May of 2022 for an additional 220MWp, is another step towards continuing to grow our renewable energy mix and reduce our CO2 emissions.”

Nickel Industries (ASX:NIC) share price today:

Oil prices, merger drive profit run for Santos

Santos (ASX:STO) is one of two major oil and gas players left on the ASX after last year’s consolidation plays, which saw the energy producer merge with PNG partner Oil Search in a multi-billion dollar deal.

It was well-timed, coming immediately before a surge in oil and gas prices that have delivered a massive lift in profits in the first half of 2022.

Santos today reported record free cash flow of US$1.7b and underlying profit of US$1.3b, powering a US$605m return to shareholders.

That will include a 38% increase in interim dividend to US7.6c unfranked (US$255m) and an increase in its previously announced share buyback from US$250m to US$350m.

“Demand for our products has remained strong in both Australia and internationally, due to increased demand and shortages of supply from producing nations due global underinvestment in new supply,” Santos MD and CEO Kevin Gallagher said.

“We are seeing these issues play out in the significant shift in global energy policy towards energy security as a key priority.

“Our critical fuels not only play a key role in the energy security of Australia and Asia, but they also provide affordable and reliable alternatives to switch from higher emitting fuels.”

Santos is also looking to take advantage of growing fears around energy security after Russia’s invasion of Ukraine, announcing an FID on the Pikka project in Alaska.

STO owns 51% of Pikka, which it says, believe if you want, aligns with its goal of achieving net zero in scope 1 and 2 emissions by 2040.

“We are seeing these issues play out in the significant shift in global energy policy towards energy security as a key priority.

“Our critical fuels not only play a key role in the energy security of Australia and Asia, but they also provide affordable and reliable alternatives to switch from higher emitting fuels.”

The project will deliver around 80,000 barrels of oil a day starting in 2026, with a 19% IRR at US$60/bbl, and is 49% owned by Spanish energy company Repsol.