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Gold/Mining/Energy : Lundin Oil (LOILY, LOILB Sweden) -- Ignore unavailable to you. Want to Upgrade?

To: Tomas who wrote (916)	2/1/1999 9:20:00 PM
From: Tomas	Read Replies (2) \| Respond to of 2742

Santos backs Papua New Guinea's $3b gas-to-Queensland plan. The Age (Australia), February 2. By BARRY FITZGERALD Santos yesterday emerged as a surprise backer of the bold $3billion plan by a Chevron-led consortium to pipe gas from Papua New Guinea's remote southern highlands to Queensland markets. The support for the project by the Adelaide-based Santos came through its acquisition of an effective 25 per cent in one of the big PNG gas fields that underpins the pipeline proposal, the Hides gas field. The interest was acquired from Oil Search for $87 million cash and a further payment of between $39million and $55 million, subject to the pipeline proceeding. Santos is already the main supplier of gas in the high-growth Queensland market from its dominant position in the onshore Cooper/Eromanga basin. As a result, the PNG-Queensland pipeline represented a direct challenge to its long-term market share. Santos stopped well short yesterday of saying it believed the pipeline would be built, admitting in the process that the acquisition of the Hides interest was a case of hedging its bets. ''The PNG to Queensland gas project, if it proceeds, will help achieve the objective of obtaining a return on this major investment,'' Santos said. It said it looked forward with all parties to progressing the pipeline proposal to ''commercial reality''. Oil Search said Santos had ''clearly made a strategic acquisition in the Hides field'', and the acquisition was a strong endorsement that there was a good chance of the pipeline proceeding. Oil Search retains a 27.5 per cent stake in Hides and full ownership of of the Hides gas-to-electricity project. Funds raised from the sale will be used to reduce debt. The sale came as Oil Search completed the refinancing of the bridge financing for last year's acquisition of BP's oil and gas interests in PNG. Chevron first floated the PNG-Queensland pipeline proposal in early 1997. Under the plan, which ranks as one of the biggest infrastructure projects for Australia and PNG, gas was meant to flow in the 2500-kilometre pipeline from mid-2001. But delays in securing gas supply contracts in Queensland, particularly for Comalco's proposed alumina refinery, mean the project remains in doubt. That is despite both the Queensland and Federal Governments throwing incentives at Comalco to commit to the refinery. Comalco has yet to commit to a full feasibility study on the alumina project and remains coy on whether the refinery will be built in Queensland or Malaysia. The PNG-Queensland pipeline project seeks to make commercial the nine trillion cubic feet of gas that Chevron expects can be proven in the southern highlands, home to the Chevron-managed Kutubu oil project. Kutubu, PNG's first oil development, produces 165 million cubic feet of gas a day, but because of a lack of markets, the gas is reinjected into the reservoir. Hides and other gas fields are to be included in the overall project to give customers the comfort of diverse and long-term supplies. theage.com.au