Commentary - Santos

Asia Pacific
Asia Pacific Business Unit EBITDAX was $371 million, 132% higher than 2011 mainly due to a full year of production from the Chim Sáo asset
in Vietnam and commencement of production from the Wortel asset in Indonesia.
The Chim Sáo asset offshore Vietnam performed strongly in 2012, with the gross oil production rate exceeding Santos’ guidance of 25,000
barrels of oil per day (“bopd”). Santos’ net entitlement to production was 2.9 mmbbl for the year. Building from the success at Chim Sáo, the
Dua oil project was sanctioned in August 2012. It involves a three-well subsea tie-back to Chim Sáo, and is expected to produce at a gross
rate of 10,000 bopd. First oil is expected in the first half of 2014.
Santos’ net entitlement gas production in Indonesia of 28.1 PJ was 17% lower than 2011, primarily due to a lower net entitlement to Maleo
gas following the favourable gas price review at the end of 2011 offset by the commencement of production from the Wortel asset in January
2012. Santos is planning to sanction the Peluang asset in 2013 which will be developed as a tie-back to Maleo with first production expected
in the first half of 2014.
In Papua New Guinea, the PNG LNG project (Santos 13.5% interest) is over 70% complete and on track for first LNG in 2014. Operated by
ExxonMobil, the project involves gas production and processing facilities in the Southern Highlands and Western Provinces of Papua New
Guinea with capacity of 6.9 million tonnes of LNG per year. In November 2012, the operator completed a cost and schedule review for the
project and advised that the project capital cost had increased to US$19 billion. This was primarily due to foreign exchange impacts, delays
from work stoppages due to community disruptions and land access, and logistics and weather challenges. The operator also advised that the
LNG plant capacity had increased from 6.6 million tonnes per annum (“mpta”) to 6.9 mtpa, with discussions underway with potential parties
for sales of additional volumes.
GLNG
Sanctioned in January 2011, the GLNG project (Santos 30% interest) is over 45% complete and on track for first LNG in 2015. The project
involves developing coal seam natural gas fields in the Bowen and Surat Basins in south-western Queensland, a 420-kilometre underground
gas transmission pipeline and a two-train LNG plant on Curtis Island at Gladstone.
The GLNG project is at the heart of Santos’ vision to create a leading Asia Pacific exploration and production company, as it is key to the
transformation of our east coast gas business through LNG export. With the sanction of the GLNG project, Santos opened a channel to the
strong Asian demand for Australian LNG, providing access to the higher priced Asian market and unlocking our east coast resources and
accelerating the conversion into reserves.
In June 2012, Santos announced that the gross capital cost estimate for the GLNG project had increased from US$16 billion to US$18.5
billion for the period from final investment decision until the end of 2015. This is based on foreign exchange rates which are consistent
with the assumptions used at FID (A$/US$0.87 average over 2011–15). The increase was primarily due to accelerated upstream development
in the Fairview and Roma fields such as additional wells, gas gathering and processing facilities, water handling facilities and other
infrastructure.
GLNG Business Unit results include domestic gas production and sales from the GLNG coal seam gas fields in south-western Queensland. GLNG
Business Unit EBITDAX was $11 million, 97% lower than 2011 mainly due to lower gains on sales of non-current assets in 2012, compared to
the sale of 15% of the GLNG project in 2011.
Santos’ share of GLNG gas production in 2012 was 10.8 PJ, 20% higher than 2011.
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