Santos close to LNG start

THE Stars are aligning for a second LNG project to be kick started in January with Santos poised to make a final decision on the Gladstone liquefied natural gas (GLNG) project, after selling a stake in the project and signing a $US120 billion sales off-take deal.

Santos has also flagged a $500 million equity raising to help pay for its share of the $US16 billion project, which will be among the first to utilise Queensland’s massive coal seam gas reserves, piping it from the Surat Basin through the Banana Shire to the port city.

The gas giant said it had sold a 7.5% stake in GLNG to Korean Gas Corp (KOGAS) and another 7.5% to French company Total for a combined $665 million.

KOGAS, the largest LNG buyer in the world, will also purchase 3.5 million tonnes per annum (mtpa) of gas from the project over 20 years, worth more than $US120 billion at consensus oil prices, Santos says. Santos chief executive David Knox said the agreements paved the way for the GLNG partners to make a final investment decision on two gas trains, rather than one.

"The stars have really aligned for GLNG in recent weeks and today’s agreements with KOGAS and Total mean that we can make the final investment decision (FID) in January,"

Mr Knox said in a teleconference from Seoul, where the deals with KOGAS were signed.

An earlier announcement by Santos of a $16 billion agreement with KOGAS and Total put Queensland within a hair’s breadth of a second huge LNG project, according to resources industry chief Michael Roche.

"This deal means that Santos now has agreements for the sale of 7 million tonnes per annum (mtpa) of its planned 7.8mtpa two train Gladstone Liquefied Natural Gas (GLNG) project," said Mr Roche, chief executive of the Queensland Resources Council.

"The combined output of LNG from BG Group’s already committed QCLNG project and the GLNG project at more than 16 million tonnes will be greater than the output from the much-vaunted Gorgon project in Western Australia."