Santos Plans First Cargo From Flagship Gas Project Within Weeks

   By Robb M. Stewart 
 

MELBOURNE, Australia--Santos Ltd. (STO.AU) expects to ship the first cargo of liquefied natural gas from its flagship project on Australia's east coast in the coming weeks after production at the facility began.

Exports of LNG would bring much-needed needed cash flow for the Australian energy company at a time when its balance sheet has been badly stretched by heavy investment in the US$18.5 billion GLNG project at the port of Gladstone in Queensland state and a slump in oil prices.

Santos said LNG is now being produced from the GLNG project's first liquefaction unit, while a second unit is expected to be ready for startup by the end of the year. The first cargo will be shipped to Asian customers within weeks, it said.

"We said we'd produce first LNG around the end of the third quarter, and that's exactly what we've done," Managing Director and Chief Executive David Knox said.

He said revenue from the project is underpinned by binding longterm sales contracts covering more than 90% of the plant's capacity.

GLNG produces natural gas found in seams of coal in Queensland and chills it into LNG for export. The plant will be able to produce 7.8 million metric tons of LNG a year when fully operational.

The project--operated by Santos, which owns a 30% interest, and counting Petronas Bhd and France's Total SA (TOT) among its venture partners--is one of three massive LNG plants in Queensland. BG Group PLC's (BG.LN) US$20.4 billion QCLNG project began exporting earlier this year, and Origin Energy Ltd.'s (ORG.AU) 24.7 billion Australian dollar (US$17.3 billion) Australia-Pacific LNG project with ConocoPhillips (COP) and Sinopec is scheduled to export its first cargo by the end of the year.

Worries about Santos's debt burden and a possible need for a dilutive equity raising have weighed heavily on the company's share price, pulling it down about 65% over the last year. The company last month launched a sweeping strategic review and said it would consider selling assets, while Mr. Knox said he would step down after seven years in the role as soon as a successor had been found.

Write to Robb M. Stewart at [e-mail]

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September 23, 2015 20:20 ET (00:20 GMT)

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