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industry news Australian LNG Producer Santos Sees LNG-Price Remaining Linked To Oil Santos believes LNG contracts will mostly remain linked to crude oil prices due to the importance of security of supply to Japanese utilities, who are the world’s biggest buyers of the fuel. Santos CEO and Managing Director David Knox told the Australian Institute of Energy Conference in Sydney on 19 November, “It is an important factor that you can buy Henry Hub gas and transport it to Tokyo Bay for about $7 MM Btu, but it’s a factor that probably in the long term is going to be on the margin.” Knox said that at current Henry Hub prices it would be theoretically possible to deliver LNG from North America to Tokyo Bay at around $11 MM Btu, compared with the Japanese spot price of around $12.50 MM Btu and Australian LNG price of $14–14.50 MM Btu. Henry Hub cash averaged $3.455 MM Btu on 16 November. Knox said that the key if you are in Japan and you are running a major utility is security of supply. He further added that to maintain security, “Japanese buyers need multiple sources of supply and they like very much to look right the way through to the reservoirs.” “They like to know that the molecules are there in the ground and they will, through prudent operators, be delivered into Tokyo Bay,” Knox said. “I suspect there will be a mixture of the way contracts are linked but I think fundamentally (oil price-linking) will remain and the reason it will remain is because of security of supply being so important.” David Knox, CEO and Managing Director Santos. Knox said he believed regulators would allow North America to export 5–10% of domestic gas consumption. “That’s 30–40 MM tpa in a global LNG market by 2025 of 450 MM tpa, so less than 10% of the global LNG market,” he added. According to FACTS Global Energy figures, presented at the AIE conference on 20 November – Japan imported 78.5 MM t of LNG in 2011 and is expected to take 82.2 MM t in 2012. FACTS sees Japan’s demand rising to 84.3 MM t in 2015 and 88.5 MM t in 2020. Santos, which claims the top spot among Australian domestic gas producers, holds stakes in four producing and developing LNG projects in the region. Santos owns 11.5% of the ConocoPhillips-operated Darwin LNG project, which produces 3.5 MM tpa. The company also has 13.5% of the 6.6 MM tpa Papua New Guinea LNG project, currently under construction by operator ExxonMobil and scheduled for startup in 2014. In Australia, Santos holds a 30% operating stake in the 7.8 MM mt/year CSG based Gladstone LNG project in Queensland, approved in January and slated to start up in 2015. In addition, Santos is targeting a FID in 2014 and first production in 2018 at its Bonapar te floating LNG project off northern Australia. The company holds 40% of the planned 2 MM tpa facility in a JV with GDF Suez. Continued from page 34 DomGas Alliance Chairman, Tony Petersen, said there was sufficient demand for gas in the state to underpin development of the Canning Basin reserves. “Western Australia is by far the largest gas market in Australia and the state depends on secure, affordable gas supply,” Mr Petersen said. “Canning Basin gas could be used to fuel new industries in the Pilbara or piped south to supply industry and households in the South West.” While most of any gas produced is likely to be supplied to the local market, the State Agreement also includes a domestic gas reservation commitment in the event of LNG exports. DomGas also endorsed the requirement for the joint-venture to make available for sale related products such as ethane, propane, butane and condensate, for possible manufacture of chemicals or use as transport fuel. “This gives long-term confidence that gas will be supplied to the state whatever the development options pursued by the project partners,” Mr Petersen said. “I commend Buru and Mitsubishi for committing to domestic supply and thereby opening up a world of opportunities for increasing the economic value of this gas to the people of this state. “The State’s 15% reservation policy has again been useful in delivering positive outcomes for project proponents and WA residents.” At the time of going to press Buru Energy was trading around $2.76. 36 | PESA News Resources | December 2012 / January 2013
industry news Gas Discovery At Crown In The Browse Basin Santos recently announced a significant gas discovery at the Crown-1 exploration well in WA-274-P, located in the Browse Basin, offshore Western Australia. Crown-1 is located approximately 500 km north of Broome, approximately 60 km west of the Ichthys field and 20 km east of the Poseidon field. The water depth at location is 440 m. By early November wireline logging had confirmed 61 m of net gas pay in the Jurassic-aged Montara, Plover and Malita reservoirs between 4,873 and 4,998 m, and the well has not intersected a gas-water contact. “The strong partnerships and the material prospectivity in this key offshore gas province positions Santos very well for the future. We look forward to the WA-408-P drilling programme,” Anderson said. Crown gas discovery, Browse Basin. 4 Pressure data has been acquired from multiple points indicating that gas would be expected to flow at a high rate. Multiple condensatebearing gas samples have been recovered to surface. Drilling is progressing to a proposed total depth of 5,200 m. Santos’ Head of Exploration Bill Ovenden described Crown-1 as an important gas discovery for the company. “The Crown discovery is well positioned, in close proximity to existing and proposed LNG projects in the Browse Basin and other material exploration prospects,” Ovenden said. Santos holds 30% of WA-274-P and is operator. JV partners are Chevron (50%) and INPEX (20%). In addition, Santos has executed agreements to take a 30% interest in the adjoining exploration permit, WA-408-P, operated by Total (50%), subject to customary conditions. Murphy Oil Corporation has a 20% interest in the permit. The JV has committed to an initial drilling programme in the permit, including Dufresne-1 and Bassett West-1. These wells are expected to immediately follow the Crown-1 program. Santos VP Western Australia and Northern Territory John Anderson said the agreement with Total and Murphy substantially increased the company’s exposure to exploration upside in the Browse Basin. December 2012 / January 2013 | PESA News Resources | 37 Prepress Jason RockMod Discover New Format Ad PESA 1-2 page REV C 07-12-11 Tuesday, July 12, 2011 12:14:00 PM
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