Commentary - Santos

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2012 delivery 3 3 3 3 3 3 3 3 GLNG project 47% complete and on track for first LNG in 2015. Over 15 million hours worked across the project. 5,200 people working on the project at year end. Upstream hub compressor station construction commenced. All pipeline landed in Queensland and pipeline construction underway. Strong progress on construction of LNG trains and supporting infrastructure on Curtis Island. Start of module construction in Batangas, the Philippines. Brisbane operations centre commissioned. Installation of the LNG tank roof plates, Curtis Island. Work at the Roma hub compressor station. 20 LNG plant construction underway at Curtis Island.
GLNG Construction well underway on a cornerstone project. On track for first LNG in 2015 The GLNG project involves the development of gas fields in the Bowen and Surat Basins, the construction of a 420-kilometre underground gas transmission pipeline and a two-train LNG processing facility on Curtis Island in Gladstone. The project is a joint venture between Santos and three of the world’s largest LNG companies, PETRONAS, Total and KOGAS. Sanctioned in January 2011, the project is now 47% complete and on track for first LNG in 2015. Building value for shareholders The GLNG project is at the heart of Santos’ vision to be a leading Asia Pacific exploration and production company. With the sanction of the GLNG project, Santos opened a channel to strong Asian demand for Australian LNG, reinvigorating our Eastern Australia business through access to the stronger priced Asian market. The scale afforded by that higher demand allows Santos to underpin the investment needed to unlock the next wave of Eastern Australia development, including Cooper Basin shale and Moomba infrastructure. The GLNG project had already provided material value before the final investment decision was made in January 2011, with the 70% sell-down to PETRONAS, Total and KOGAS generating $3.3 billion in cash proceeds. Underpinned by binding 20-year sales contracts with KOGAS and PETRONAS, GLNG is a new legacy asset that will generate substantial cash flow to fund the next wave of Santos’ growth after 2015. Gas supply build continues To execute the most efficient gas supply for the project, gas will be sourced from the dedicated CSG fields, underground storage, supply from Santos’ portfolio and third parties. In 2012, 143 wells were drilled in the project’s CSG acreage, with the gas produced supplied to domestic contracts and the remainder injected into underground storage. A further 200 to 300 wells are planned to be drilled each year from 2013 to 2015. Additional gas supply agreements for a total of 595 PJ were signed with third parties in 2012 for gas supply to the GLNG project, adding to the 750 petajoules that Santos has agreed to supply, primarily from the Cooper Basin. Gasfield and pipeline construction underway More than 5,200 people are currently working on the GLNG project, with a significant number in the upstream and pipeline construction. Construction is currently underway at the three hub compressor stations in Fairview and Roma, with site foundations well advanced and equipment installation commenced. Materials and equipment for key infrastructure continue to arrive from local and overseas suppliers. All 420 kilometres of the gas transmission pipeline have been delivered to site, marking a significant milestone for the project. Construction continues with over 140 kilometres of the mainland pipeline right-of-way cleared and graded, and pipeline welding well underway. In December, pipeline burial in the Arcadia Valley commenced – the final step before rehabilitation works are carried out. LNG plant and port construction On Curtis Island, construction of the two LNG trains and supporting infrastructure continues to progress. Bulk earthworks have been completed, and the first mechanical equipment has been installed on Train 1. Good progress has been made on the LNG tanks, with installation of roof plates and concrete wall construction ongoing. Work is also underway at the module yard in the Philippines to construct and assemble the 110 modules required, with modules planned to be shipped to site in 2013. Capital cost estimate increased to US$18.5 billion In June 2012, Santos announced that the gross capital cost estimate for the GLNG project would be increased from US$16 billion to US$18.5 billion for the period from final investment decision (FID) until the end of 2015. This is based on foreign exchange rates that are consistent with the assumptions used at FID (A$/US$0.87 average over 2011 to 2015). The increase primarily relates to additional upstream development in the Fairview and Roma fields, such as additional compressors, wells, gathering production facilities, water handling facilities and other infrastructure. Santos Annual Report 2012 21
Page 1 and 2: Annual Report 2012 The energy to de
Page 3 and 4: World of Santos Ref Location Site/A
Page 5 and 6: Contents Overview 2 Operating and f
Page 7 and 8: Operating cash flow $1,658 million
Page 9 and 10: Review by Peter Coates and David Kn
Page 11 and 12: Our vision and strategy Our vision
Page 13 and 14: Production and sales Santos continu
Page 15 and 16: RESERVES (SANTOS SHARE) mmboe Year-
Page 17 and 18: NET PROFIT AFTER TAX $million AVAIL
Page 19 and 20: 2012 key statistics GREENHOUSE GAS
Page 21 and 22: Eastern Australia Positioned for gr
Page 23: On board the Mutineer-Exeter FPSO,
Page 27 and 28: Pipelay underway at the Dua oil pro
Page 29 and 30: Jane Sharman Hemstritch BSc (Hons),
Page 31 and 32: DAVID KNOX Chief Executive Officer
Page 33 and 34: Principle 4 - Safeguard integrity i
Page 35 and 36: DEFINING REQUIRED SKILLS AND EXPERI
Page 37 and 38: Internal Board Review process Imple
Page 39 and 40: 2.2 Indemnity, access to informatio
Page 41 and 42: Regular meetings held with auditors
Page 43 and 44: 4.3 Examples of business risks Exam
Page 45 and 46: 4.4 Independence of auditors and no
Page 47 and 48: The Company remains committed to at
Page 49 and 50: Organisation chart BOARD COMMITTEES
Page 51 and 52: As at 31 December 2003 2004 2005 20
Page 53 and 54: Directors’ Report The Directors p
Page 55 and 56: Principal Activities The principal
Page 57 and 58: Asia Pacific Asia Pacific Business
Page 59 and 60: Dividends On 22 February 2013, the
Page 61 and 62: Shares Issued on the Exercise of Op
Page 63 and 64: The Company believes that the addit
Page 65 and 66: Remuneration Governance People and
Page 67 and 68: Long-term Incentives (“LTI”) Th
Page 69 and 70: Long-term Incentives How much annua
Page 71 and 72: Senior Executive Remuneration Overv
Page 73 and 74: Table 7: Non-executive Directors’
Page 75 and 76:
Table 9 contains details of the num
Page 77 and 78:
Details of the fees and other benef
Page 79 and 80:
Long-term incentives How are long-t
Page 81 and 82:
Index A Announcements 173 Annual G
Page 83 and 84:
Major announcements made in 2012 13
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