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Santos announces Gladstone LNG purchase agreement with Origin Energy

December 20, 2013 • News

Australian oil and gas producer Santos Ltd has signed a second gas purchase agreement with rival company Origin Energy for the purchase of 100 petajoules (PJ) of gas to supply its Gladstone liquefied natural gas (GLNG) project in eastern Australia.

Image: http://www.santoswaterportal.com.au/

Image: http://www.santoswaterportal.com.au/

According to a news announcement from the company on Thursday, the gas will be supplied at Wallumbilla over a period of five years beginning January 2016. Pricing will be based on an oil-linked formula.

The agreement also stipulates that Origin can supply an additional 94 PJ of gas during the same five-year period.

Rod Duke, Vice President Downstream GLNG, said the project had secured a diverse gas supply portfolio, including supply from GLNG’s own coal seam gas fields, Santos portfolio gas, underground storage and third party supply.

“When combined with GLNG’s quality LNG off-take contracts with project partners PETRONAS and KOGAS, this supply portfolio delivers significant value to the project,” Mr Duke said.

“The GLNG project is progressing well – we are now more than 72% complete and remain on track for first LNG in 2015.”

The agreement announced on Thursday adds to existing agreements for the supply of 750 PJ of Santos portfolio gas to GLNG over a 15-year period, plus an earlier agreement with Origin for the supply of 365 PJ of gas over a 10-year period.

According to Reuters the agreement comes amidst uncertainty that Santos will be able to fully supply its $18.5 billion Gladstone plant with enough gas.

“The key controversy for Santos remains whether the underlying coal seam gas resource base and contracted third party gas can meet supply obligation for two LNG trains,” Neil Beveridge, an analyst with Bernstein Research in Hong Kong said.

“Based on experience from other CSG basins, we believe there are risks of supply shortfall.”

Santos has a 30% interest in GLNG. The other participants are PETRONAS (27.5%), Total (27.5%) and KOGAS (15%).

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