Australian oil and gas giant Santos Ltd. secured regulatory approval on Monday for a revised drilling plan at its $4.3 billion Barossa gas project. However, the fate of a critical pipeline remains uncertain due to a separate legal dispute.

Previously stalled in September 2022, drilling roughly 285 km off northern Australia was halted after a court ruling found insufficient consultation with Indigenous communities on nearby Tiwi Islands.

Following extensive consultations, Santos' updated proposal received the green light from the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) on Friday.

While the approval carries a 30-day appeal window, analysts believe NOPSEMA's meticulous review aimed to minimize legal challenges. Santos declined immediate comment on a potential drilling restart timeline.

The approval presents a positive step for the Santos major expansion project, coming just after preliminary merger talks with industry giant Woodside Energy were revealed.

However, another legal hurdle remains. Work on a critical section of the gas pipeline to Darwin was ordered halted in November by a court, responding to concerns from a Tiwi Islands traditional landowner regarding underwater cultural heritage, with a final decision on resuming pipeline construction expected in January 2024.

Despite ongoing challenges, Santos reiterated its target of first gas production from Barossa by mid-2025. However, Citi analysts warn that a January ruling against Santos could delay the project by over a year.

Adding to the company's portfolio, Santos announced a feasibility study with JX Nippon Oil & Gas Exploration Corporation and ENEOS Corporation for a project to ship carbon dioxide from Japan to Santos' carbon capture and storage facility in Moomba.