Whyalla rescue, Santos gift. A multi-billion-fossil-subsidy-fest in the pipeline?

As the State and Federal Governments propose to add $2.4 billion to the Whyalla Steelworks financial disaster, the man responsible is riding off into the sunset. Kim Wingerei with story.

The South Australian government placed Whyalla Steelworks into administration in February 2025 following years of mismanagement under Sanjeev Gupta and mounting debts, including unpaid royalties.

Despite this, Gupta continues to defend the “green steel” dream as a potential nightmare if the South Australian and Federal Governments get their way.

Recovery plans include support for the plant’s transition from coal-fired to gas-fired. However, this will only be possible if the Government is ready to subsidize natural gas. At current prices Australian gas is very expensive.

Of course, it’s not “green” either. Natural gas in theory emits less CO2 than coal-fired plants (assuming minimal gas leakage), but renewable energy is crucial for the green steel dream to come to fruition.

Will Bluescope bid?

Bluescope Steel (ASX:BSL) has been named the preferred bidder, with the right of final refusal in what the SA Government hopes will be a “competitive tender process”.

However, Bluescope is demanding “billions of dollars in gas subsidies” if the tender goes ahead.

At general meetings this week, outgoing CEO Mark Vassella and CEO-elect Tania Archibald sought to reiterate the company’s commitment to Net Zero, but neither mentioned the potential for a Whyalla acquisition.

According to a new news report “Gas-based iron and steel production in SA is completely uneconomic; gas prices here are among the highest in the gas-producing world,” according to Climate Energy Finance (CEF). And as readers MWM We know full well (even if Matt Canavan doesn’t) that our high gas prices are caused by the gas oligopoly pushing gas into export markets.

Gas Empire: How Australians pay off foreign profiteers

CEF estimates gas supply subsidies to gas-based Whyalla will exceed $1.7 billion over a decade, but this may still not be enough to make it competitive.

Santos (ASX:STO), Whyalla’s logical gas supplier, will be the main beneficiary of these subsidies. Over the last decade, Santos paid a total of $3.1 million in income taxes on $42.8 billion in income.

An opportunity was missed

CEF’s Matt Pollard said: MWM, “The transformation of Whyalla Steelworks is a generational opportunity, but South Australia stands at a critical juncture. A methane-based ‘transition’ would represent a serious strategic misstep and misalignment of economic policy with climate targets, leading to lasting budget and national interest implications.”

Gas is neither a temporary nor long-term solution for Whyalla.

Green Steel is a huge opportunity for Australia to move up the value chain of steel production while reducing our emissions. South Australia in particular is well positioned as one of the lowest cost, highest penetration variable renewable energy grids in the world, with variable renewable energy penetration of 72%.

CEF Director Tim Buckley points out that “global moves to accelerate the decarbonisation of global iron and steel supply chains mean Australia faces a major strategic threat to our largest export product, iron ore”.

Co-author of the report, Superpower InstituteThe company, led by former ACCC chairman Rod Sims and economist Ross Garnaut, echoes these sentiments: “There is an incredible opportunity for Whyalla to become Australia’s first green iron and steel production success story. … Government support for the gas option at this point would be a significant misstep.”

As for Sanjeev Gupta, his company GFG Alliance received $375,000 Slap on the wrist from ASIC The debts left behind due to late reporting will be paid by taxpayers.

Huge rescue operation in Whyalla leaves questions for watchdog ASIC