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Australian-based Santos’ liquefied natural gas strategy will focus on Alaska, Papua New Guinea and Beetaloo and Bedout basins domestically, it announced in an investor briefing day in Sydney today (26 May).
It said the tier-1 basins will provide scale, higher margins and enable it to leverage existing advantaged infrastructure. The Beetaloo sub-basin is located around 500km southeast of Darwin while the Bedout basin lies on the northwest shelf of Western Australia. In Alaska, Santos is one of the largest leaseholders, controlling over 500 oil and gas leases across the North Slope.
Kevin Gallagher, Managing Director and CEO, said, “Current global instability has brought energy security sharply into focus. This has only reinforced the value of Santos’ diversified asset portfolio and geographic proximity to the fastest growing demand markets in the Asia Pacific.”
The international push comes as the Australian government proposes a domestic gas reservation mandate which would force export ventures – such as Santos’ Gladstone LNG project in Queensland – to divert supply to the local east coast market.
Santos announced final investment decision tie-in project in Papua New Guinea this month, following approval by the PNG LNG joint venture.
The project will deliver feed gas from the Santos-operated Agogo facility to the PNG LNG gas pipeline via a new 19km pipeline, together with two new wells and associated production facility modifications. First gas is targeted Q2 2028.
The Australian government has been promoting its LNG reliability during the current Middle East crisis and Japan has asked to boost output to prevent energy shortfalls across the Asia-Pacific region. Australia is the second largest LNG exporter globally.
However up to 83% of Australian LNG output is pre-allocated through strict, long-term supply contracts, mostly bound for Japan, China, South Korea, and Taiwan.
Rising LNG prices are likely to massively boost Australian LNG export earnings, as happened after Russia’s expanded invasion of Ukraine, when oil and gas sector profits increased from AU$13bn in FY2020-21 to AU$62bn in FY2022-23, according to the Institute for Energy Economics and Financial Analysis.
But Australia’s taxation of LNG exports suggests that higher international prices will not fully translate into higher tax receipts, it notes.
