Commentary - Santos

Western Australia
and Northern Territory
Proven record of delivery with
strong growth opportunities.
The WA&NT business has gone from strength
to strength, posting record gas production
from the Carnarvon Basin and contributing
over a third of Santos’ 2012 production and
revenue.
Santos’ strategy is to build on this success
through further domestic gas sales, increased
oil production and progress towards the
commercialisation of its northern Australian
assets.
STRONG DOMESTIC GAS
PRODUCTION
Santos’ Western Australia domestic gas
production was up over 40% in 2012, driven
by the Reindeer and Spar fields brought on
line in 2011. With partner Apache Energy,
Santos processes gas through the Varanus
Island and Devil Creek facilities in the
Carnarvon Basin, and supplies it to mining
and industrial customers.
Options to grow this domestic gas business
include new sales for Reindeer gas, additional
processing capacity at Devil Creek and
follow-on projects in the Spar and John
Brookes gas fields.
CARNARVON OIL DEVELOPMENT
ONGOING
Sanctioned in January 2012, the Fletcher
Finucane oil project is currently 85% complete
and on track for first oil in mid-2013. All three
development wells have been drilled and
completed. Offshore installation of the
sub-sea facilities, including the tie-in of the
three wells into the Mutineer-Exeter facilities,
will commence in early 2013.
In December, Santos acquired Woodside’s
8.2% interest in Mutineer-Exeter, which
will result in aligned joint-venture parties
having interests in both Mutineer-Exeter
and Fletcher Finucane. Santos has also
identified a number of follow-on oil
opportunities in the Mutineer-Exeter
area, which will be explored over the
next few years.
CROWN GAS DISCOVERY
In November, Santos made a significant gas
discovery at the Crown exploration well in
WA-274-P, located between the Poseidon
and Ichthys fields in the offshore Browse
Basin. The well was drilled to a total depth
of 5,301 metres and intersected 61 metres
of net gas pay in the Jurassic-aged Montara,
Plover and Malita reservoirs. Pressure data
was acquired at multiple points indicating
that gas would be expected to flow at a
high rate and multiple condensate-bearing
gas samples were recovered to surface. The
preliminary recoverable contingent resource
estimate for the discovery is up to 5 TCF.
The Crown discovery is located close
to existing and proposed LNG projects
in the Browse Basin, with discussions
underway with joint-venture partners
for follow-up drilling.
EXCITING 2013 DRILLING
PROGRAM
An exciting exploration program is planned
for the Browse Basin in 2013, following the
success of Crown in 2012. Drilling of the
Dufresne and Bassett-West prospects is
planned for the first half, targeting gas
and associated liquids in the neighbouring
permit WA-408-P.
In the Carnarvon Basin, drilling of the
Winchester exploration well is planned for
2013, and gas with high gas liquids content
is anticipated. The Zola appraisal well is also
planned to be drilled, a follow-up from the
2011 discovery of 100 metres of net gas pay
in an excellent quality reservoir. Multiple
development options exist, including
domestic gas opportunities and tie-back
to third-party LNG projects.
OFFSHORE NORTHERN
AUSTRALIA PROGRESS
In June, Santos and partner ConocoPhillips
signed an agreement with South Korea’s
SK E&S to progress the appraisal of the
Caldita Barossa gas fields. Under the
agreement, SK E&S will fund up to US$520
million in joint venture carry obligations
and contingent payments, with planning
for a three-well appraisal program currently
underway. Various development options for
the fields will be assessed, including floating
LNG and a tie-back to the Darwin LNG plant.
In October, the Bonaparte LNG project
cleared a major regulatory milestone,
receiving environmental approval from the
Australian Government. GDF SUEZ Bonaparte,
the operator and Santos’ partner in the
project, has awarded contracts to KBR and
Technip to complete independent designs
of the floating LNG facility during the
concept definition stage of development.
NORTHERN TERRItorY SHALE
FARM-IN
Onshore, Santos is expanding its footprint
in the Northern Territory, with a farm-in to
four prospective shale gas and oil permits in
the McArthur Basin announced in December.
The permits offer gas and liquids potential
close to existing infrastructure, including
gas pipelines, a railway and a major highway.
These assets add to Santos’ NT portfolio led
by Darwin LNG, which continued to perform
strongly following a planned shutdown in the
first half of 2012.
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