Papua New Guinea: Santos gives gas to $5.5bn pipeline project - The Australian
By RICHARD SPROULL
The Australian, Thursday April 22
SANTOS looks set to follow US energy giant Exxon Corp's lead in committing gas from its share of the Hides field to the proposed $5.5 billion Papua New Guinea to Queensland pipeline project.
The project cleared a significant hurdle last week when participant Oil Search Ltd
reached agreement with Hides operator, Exxon Corp, to secure sufficient long-term
gas reserves to underpin the Queensland market for the pipeline.
Santos managing director Ross Adler said he met with Oil Search managing director
Peter Botten 10 days ago and told him Santos was interested in joining the
consortium supplying gas to the pipeline.
"We've always said that we're happy to be part of the project and the only reason
that we weren't included last week is that we haven't had enough discussion with Oil
Search yet," Mr Adler said yesterday.
He said Santos would probably commit to an agreement "fairly soon".
"I can't tell you the final form of it, but what I can say is that our gas will be part of
the project and we will certainly co-operate and, like (Exxon), we want to be sure of
the project economics," Mr Adler said.
But he warned that customers would have to be prepared to "pay a fair price" for the
PNG gas, adding there had been "a little bit of hysteria" over the project.
Comalco is considering PNG gas for its proposed $1.4 billion alumina refinery in
Gladstone. It is yet to reach agreement with pipeline participants over price but said
last week the difference was "less than 10 per cent".
Santos acquired its 25 per cent stake in Hides from Oil Search for up to $140 million
earlier this year.
Hides, the largest of the PNG gas fields, has reserves of 5.5 trillion cubic feet, with
Exxon holding a 47.5 per cent stake and Oil Search the remaining 27.5 per cent.
US energy group Chevron Corp, co-ordinator of the pipeline project and operator of
the smaller Kutubu field in which Oil Search also holds a stake, had failed after
months of negotiations with Exxon to reach agreement on integrating the reserves.
Mr Adler said Santos would probably want to be part of the marketing team for the gas.
AGL Wholesale Gas was appointed last week to help with the marketing and
converting of agreements with potential customers into bankable contracts.
Mr Adler said he believed there was a market for PNG gas.
"It's a question of whether customers are going to be rational enough to get a major
project off the ground, and I think they've got to be prepared to accept prices that at
the end of the day, are going to be reasonable."
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