South Australia has taken another significant step in its industrial strategy after finalising a long-term agreement with Santos that will reserve substantial volumes of natural gas for domestic use, with the Whyalla Steelworks expected to be the primary beneficiary.

The agreement is designed to strengthen energy security, support heavy industry and provide greater certainty for the future owner of the Whyalla Steelworks as the facility prepares for a transition toward lower-emissions steel production.

Premier Peter Malinauskas and Santos chief executive Kevin Gallagher have formally signed the South Australian Strategic Gas Reserve agreement. Under the arrangement, Santos will supply 20 petajoules of gas each year for ten years from 2030. The gas would otherwise have been sold into overseas markets but will instead remain in South Australia for industrial use.

The annual allocation represents roughly one-third of South Australia’s current total gas consumption across residential, commercial and industrial customers. State leaders say reliable and competitively priced gas will be critical for attracting a long-term owner for the Whyalla Steelworks and supporting its planned transition to lower-emissions steelmaking using direct reduced iron technology.

According to the South Australian Government, replacing the existing blast furnace process with gas-based production could reduce annual carbon emissions from the steelworks by almost half, from approximately 2.45 million tonnes of carbon dioxide to about 1.25 million tonnes each year. The estimated reduction is comparable to removing hundreds of thousands of cars from Australian roads.

The agreement also forms part of broader efforts to secure the future of Whyalla following the steelworks entering administration in 2025. State and federal governments have previously announced a multibillion-dollar support package while administrators continue searching for a long-term purchaser capable of modernising the nationally significant industrial facility.

Santos said the arrangement provides long-term certainty for domestic industry while supporting continued investment in the Cooper Basin. The company also stated that the agreement helps sustain employment across Adelaide, Whyalla, Port Bonython and regional South Australia by providing confidence for future gas production and infrastructure investment.

Financial details of the agreement have not been publicly disclosed. The South Australian Government has confirmed it will pre-pay for part of the gas supply to support infrastructure development, with plans to recover those costs through future commercial arrangements once a new operator takes control of the steelworks.

Some industry observers view the agreement as an important bridge between existing gas infrastructure and future low-emissions manufacturing. Others continue to argue that Australia’s long-term decarbonisation strategy should rely more heavily on renewable energy and green hydrogen rather than extended use of natural gas. Those differing views remain part of the wider policy discussion surrounding the future of heavy industry.

For now, the agreement provides a clearer energy pathway for one of Australia’s most important steelmaking facilities. Whether it ultimately delivers the anticipated economic, employment and environmental outcomes will depend on the successful sale, modernisation and long-term operation of the Whyalla Steelworks over the coming decade.