Interesting article in Sydney Morning Herald: Santos buys into PNG gas pipeline!
Sydney Morning Herald 02/02/99
By KATE ASKEW - Resources Writer
Santos buys into Hides and PNG gas pipeline
Santos has moved to shore up its position in the Queensland gas market through the acquisition of gas reserves in Papua New Guinea, paying as much as $US90 million for a 9 per cent stake in the proposed $US3.5 billion PNG-to-Queensland gas pipeline.
The deal, which involves the acquisition of 25 per cent of the Hides gasfield from Oil Search, is the final piece in Oil Search's $US400 million ($634 million) acquisition of British Petroleum's PNG assets. Oil Search made the acquisition intending to on-sell some of BP's assets.
The Port Moresby based company, which maintains the lion's share of the pipeline reserves with about 25 per cent, also confirmed yesterday it had completed a $US245 million refinancing into long-term corporate debt which, along with the sale of Hides gas to Santos, paves the way for the integration of Hides gas into the pipeline project.
Oil Search shares, which have gained 13 per cent in the past week, rose 2c to $1.75 yesterday. Santos fell 2c to $4.61.
While the integration of Hides has been agreed in principle, the major partner, Exxon, with 47.5 per cent, is understood to have been stalling until Oil Search had been completed its negotiations.
Adelaide-based Santos' endorsement of the pipeline project, along with the level of interest showed by Woodside Petroleum in the assets, comes as negotiations continue between the pipeline sponsors and its key potential customer Comalco. Last week the Federal Government announced a $100-million support package for Comalco's proposed alumina refinery at Gladstone.
Comalco has said it would not commit to a formal gas sales contract until the Hides integration was completed.
Santos was in danger of being priced out of the Queensland gas market. Stockbroking analysts estimated PNG gas could be delivered to foundation customers for about $2 a gigajoule, less than half the cost of buying gas from Santos.
Some market watchers believe there is less likelihood of Hides gas being sold into the pipeline in the long term, given the discovery of gas this month in the foreland region of PNG.
The Kimu-1 discovery, will be closer to the offshore pipeline and carries less risk than Kutubu and Hides gas in the highlands of PNG.
Nevertheless, Hides gas is needed in the short term to underpin reserves for the pipeline project in order to convince customers to sign sales contracts.
smh.com.au |
