Australia’s largest natural gas supplier reported on Wednesday a 221 per cent surge in net profit after tax to $US2.1 billion for the year ending December 31.

Gas prices and demand skyrocketed in 2022 as western countries shunned Russian suppliers in favour of more politically expedient alternatives.

The profit announcement came a day after news that the company was granted federal environmental approval to drill 116 new coal seam gas wells in Queensland.

Environment Minister Tanya Plibersek’s department on Friday gave the green light for fossil fuel producer Towrie’s project in the Arcadia Valley, about 500 kilometres northwest of Brisbane.

The approval of 116 new wells will produce coal seam gas from the Surat Basin for 30 years and is linked to the Santos-owned GLNG gas export project in central Queensland.

Santos said it also benefited from the transition to renewables as governments looked to dispatchable natural gas to shore up reliability in the energy grid.

“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,” chief executive Kevin Gallagher said.

But these sentiments were not shared by Will van de Pol, acting executive director of environmental advocacy group Market Forces.

“Santos’ remuneration report reveals an abject failure of corporate governance,” he said.

“Santos’ board is paying executives big bonuses for increasing oil and gas production and developing new projects incompatible with the climate goals the company and its investors claim to support.”

While Santos forecasts its gas production will drop from 103 million barrels of oil equivalent (mmboe) in 2022 to 89 to 96 mmboe in 2023, it remains confident in the long-term demand for natural gas due to continued Asian economic growth, rising global population, urbanisation in developing economies and growing demand for lower-emission fossil fuels, relative to coal.

The International Energy Agency forecasts natural gas will provide around a quarter of the world’s energy needs until at least 2050.

Earnings before interest, taxes, depreciation and amortisation came in at US$5.5b. Despite more than double the previous year’s earnings, the result was marginally below consensus expectations.

RBC capital markets analyst Gordon Ramsay attributed the earnings miss to slightly higher than expected unit production costs of US$7.82 a barrel due to higher operating costs for Santos’ Cooper Basin and Western Australia assets.

Santos awarded shareholders a bumper 78 per cent increase in its final dividend to US15.1c, taking its full-year dividend to US22.7c.