Santos To Supply Cooper Basin Conventional Gas To Gladstone LNG

Santos Ltd. (STO.AU) said Monday that it will supply conventional natural gas from interests in the Cooper Basin to its proposed gas export joint venture in Queensland state.

Santos and joint venture partners Petroliam Nasional Bhd. and Total S.A. (TOT) had originally planned to feed their liquefied natural gas project at Gladstone with coal seam gas from southern Queensland. Analysts, however, are concerned that Santos may not be able to prove up sufficient coal seam gas reserves in time to support a two-train LNG project.

In a deal that will help douse those concerns, Santos said Monday that it will supply 750 petajoules of gas, primarily from the Cooper Basin in central Australia, to the Gladstone LNG project for 15 years commencing 2014. Prices will be linked to the prevailing oil price, Santos said.

Discussions are currently being held with other Cooper Basin joint venture partners about participating in the supply arrangement. These include Beach Energy Ltd. (BPT.AU) and Origin Energy Ltd. (ORG.AU).

Security of gas supply to Gladstone LNG may help Santos progress LNG sales talks it's currently engaged in with Korea Gas Corp. (036460.SE) and other potential Asian buyers.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [e-mail]