Commentary - Santos

Eastern
Australia
Positioned for growth, with innovation and
investment helping us meet rising demand
locally and abroad.
Santos is a leading producer of natural gas,
gas liquids and crude oil in eastern Australia.
Gas is sold primarily to domestic retailers
and industry, while gas liquids and crude oil
are sold in the domestic and export markets.
The demand for natural gas in eastern
Australia is expected to triple by 2016 which
is driving gas prices significantly higher.
Santos has substantial gas reserves and
resources, conventional and unconventional,
and is well positioned to supply the growing
eastern Australian gas market.
Our aim is to double current production by
2020 whilst delivering lower production costs
per barrel through maximising utilisation of
existing infrastructure.
COOPER GAS TRANSITION
UNDERWAY
Gas production of 66.6 petajoules during
2012 was 1% higher than 2011,
with improvements in field and plant
downtime partially offset by lower upstream
capacity due to the project backlog caused
by the wet weather that affected the
2010–2011 drilling campaigns.
During the year, 23 gas development wells
were drilled, including the Tindilpie six-well
pad that will produce 15 mmscf/day.
Multi-well pad technology is used extensively
in the United States for its greater efficiency,
lower costs and a smaller environmental
footprint. A 16-well pad is planned for the
Cowralli field for 2013, with an expected
reduction in each well cost of 16%.
During the year, Santos also developed plans
for a phased expansion of the Moomba
processing plant, with phase one gross
investment of up to $800 million over the
next four years.
This will be the most significant project in
three decades affecting the Moomba plant
and field satellites, and will include an
additional carbon dioxide processing train
and associated facilities, upgrades to
existing satellite compression stations, and
installation of gathering systems and
trunklines covering hundreds of kilometres.
DELIVERING COOPER OIL
Santos produced 3.2 million barrels of oil
from the Cooper Basin in 2012, its highest
production since 2009. Driving the increase
was the 2011 drilling campaigns in the Zeus
and Cook fields, improved access to field
infrastructure following the 2010–2011
floods, and strong performance from the
Charo wells brought on line in the third
quarter of 2012.
In addition, Santos generated additional
revenue through the ongoing processing
of third-party crude oil at Moomba. This
is expected to grow by 30% in 2013 as
additional third-party volumes are processed.
MOOMBA-191 SUCCESS
Santos achieved a significant milestone in the
second half of 2012 with the commencement
of Australia’s first commercial production of
gas from a shale well.
The Moomba-191 well was commissioned
in late September 2012 with an initial flow
rate greater than 3 mmscf/day, exceeding
expectations. As it was only 350 metres
away from existing pipelines and only eight
kilometres from Moomba, the well was able
to be connected to the market within weeks.
As at the end of the year, the well was
flowing at 2.4 mmscf/day, a pleasing result.
Following this success, Santos will expand
its unconventional gas exploration campaign
in 2013, with four exploration wells targeting
Moomba shale and the Nappamerri Trough
basin centred gas plays.
NSW GAS OPPORTUNITY
Santos has the largest natural gas
acreage position in New South Wales,
with uncontracted reserves close to
existing market channels.
Santos plans to commence a three-year
drilling and seismic program in the Gunnedah
Basin in 2013, including pilot and corehole
wells to gather production data, working
over existing wells and constructing
state-of-the-art water treatment facilities.
FARM-IN TO AMADEUS AND
PEDIRKA BASINS
In October, Santos announced a farm-in with
Central Petroleum Ltd to earn a 70% interest
in 13 permits in the Amadeus and Pedirka
Basins, onshore Northern Territory.
Under the agreement, Santos will be the
operator of all the permits. A 2D seismic
survey and an exploration well are planned,
targeting a potentially large conventional
and unconventional gas resource.
The proposed program is a natural extension
to Santos’ existing operations in the Mereenie
field in the Amadeus Basin, which are
managed by the Eastern Australia business
and produce oil, condensate and gas.
Santos Annual Report 2012 17