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One of the most rewarding elements of the project is that the exploration, appraisal and extraction of oil is being achieved with leading edge technology that leaves only a light environmental footprint to be rehabilitated.

Eastern Australian gas – Santos is still the largest producer of natural gas in eastern Australia and is well positioned to meet the growing gas demand in this region.

The Fairview coal seam gas (CSG) project was fully integrated into Santos’ operations during 2006 and has recorded a 67% increase in production since acquisition.

With existing production from the Scotia and Fairview fields, plus significant additional upside demonstrated by successful pilot drilling at Roma, CSG has been built into a new legacy asset for Santos. Total CSG reserves in southern Queensland now outweigh the gas reserves in the Cooper Basin.

Western Australian oil and gas Reflecting robust demand for energy, gas contract prices in Western Australia have recently moved to more than $5/GJ – sharply higher pricing that will support further gas developments.

With uncontracted 2P reserves of 200 PJ of gas at John Brookes and a 45% interest in the 300–500 PJ resource at Reindeer (from which the joint venture is targeting first production in 2010), Santos is set to make a significant contribution towards meeting Western Australia’s domestic demand for gas.

6 Santos Annual Report 2006

LNG projects – Santos became a LNG producer for the first time in 2006 with the initial cargoes from the Darwin LNG plant shipped to customers in Japan.

The potential to convert the large contingent gas reserves in Papua New Guinea into producing assets has been boosted by renewed consideration of a LNG development in the country.

Santos is aligned with the operator ExxonMobil in the evaluation of a 5–6.5 million tonnes per annum LNG plant, with a target start-up date of 2012–2013.

In the waters off the Northern Territory, appraisal work continues targeting a second train of 3.5–6 million tonnes per annum at the Darwin LNG project.

Santos has a 40% interest in each of the Barossa, Caldita and Evans Shoal gas fields. A large 3D seismic survey is currently underway following the drilling of three wells on these structures in the past 12 months.

Asian growth – Santos refocused its international strategy in 2006 with a greater emphasis on Asia and a decision to divest the Company’s United States holdings.

We made a new country entry into Vietnam which yielded almost immediate success with the Blackbird and Dua oil discoveries. These fields, in addition to the existing Swan gas field discovery in southern Vietnamese waters, are being considered for development.

In Indonesia, the Maleo gas project came on-stream in 2006 and the Oyong project is scheduled to begin producing oil in mid 2007, with the gas component of this project to follow in 2008.

We added India to our Asian portfolio in early 2007 when, against strong international competition, we secured two blocks of attractive frontier exploration acreage in the offshore Bengal Basin.

The Company has committed to an eight-year $90 million work program which includes 2D and 3D seismic data acquisition and one exploration well.


Santos took significant steps in 2006 towards achieving the important goal of having a fully-integrated approach to managing our business for long- term sustainability.

This Company-wide program demands continuous improvement in our approach to exploration, development and production, and other key indicators of sustainability such as environment, health and safety, ethics and conduct, our people and community relations.

One area in which we will redouble our efforts in 2007 is occupational health and safety.

As well as producing positive outcomes for all stakeholders, sustainability improves Santos’ efficiency and profitability as it strives for a leadership position in the international energy marketplace.

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