LNG and carbon opportunities a priority
LNG commercialisation opportunities will be an important focus for Santos in 2007 as the Company seeks to convert contingent gas resources into new developments.
The Hides gas field in Papua New Guinea’s Southern Highlands, in which Santos has a 25% interest, is the largest known gas resource in the region and would be expected to be the cornerstone of any LNG project.
Initial studies indicate there are potential sites for a LNG development on PNG’s southern coast and that sufficient reserves exist to support a single LNG train.
Santos is very supportive of the efforts by the operator of the Hides field, ExxonMobil, to commercialise these gas reserves, targeting production in 2012–2013.
In Australian waters, Santos continued exploration and appraisal work on the Evans Shoal South, Caldita and Barossa gas fields in the Timor/Bonaparte region to prove up the resource required to support a second LNG train at the Wickham Point plant in Darwin.
PURSUING CARBON CAPTURE TECHNOLOGIES
The project would involve construction of a 100 megawatt power station fuelled by Fairview’s CSG. Exhaust gases containing CO2 would be captured, compressed and transported by pipeline to be injected deep underground into the Fairview coal seams.
In a move that enhances the sustainability benefits of the project, water produced with the coal seam gas would be used in the power station. The electricity generated would be sold into the national grid via a new 100- kilometre transmission line to Roma.
A final investment decision on the Fairview Power Project, which is a joint venture with General Electric Energy, is expected by the end of 2007.
Santos recognises that a well- designed emissions trading scheme will be a key component of a portfolio of initiatives to reduce Australia’s greenhouse gas emissions.
Santos is playing a leading role in the pursuit of the lower carbon emission energy technologies demanded by climate change.
In 2007, Santos expects to complete its evaluation of a proposed CO2 capture and storage project based on the Company’s Fairview CSG operations in southern Queensland.
The proposed $435 million Fairview Power Project, which would be funded in part by a $75 million grant from the Australian Government’s Low Emissions Technology Demonstration Fund, would be one of the largest CO2 geosequestration projects in the world.
Emissions trading provides a mechanism by which the market determines the least cost means of emissions abatement, and the Company supports the earliest possible introduction of such a scheme on a national basis.
Natural gas is a transition fuel between coal-fired electricity and a clean-fuel future. If Australia is to achieve emissions abatement over the long term, natural gas must play a much greater role in electricity generation.
22 Santos Annual Report 2006
INCREASED STAKE IN KIPPER
Santos acquired Woodside Petroleum’s 21% stake in the Kipper gas field, located off the Gippsland coast in Victoria, to take its interest to 35%. A production licence for the field, which is estimated to contain 620 billion cubic feet of recoverable gas and 30 million barrels of condensate and LPG, was approved by the Victorian Government.
Kipper gas and liquids will be processed at the nearby Longford facility with production expected to commence in 2010.
Santos acquired the outstanding minority interests, other than Origin Energy, in the Fairview field in 2006. The three minority interests represented, in aggregate, 5% of Fairview, and the acquisition takes Santos’ working interest to 79.5%.
In addition, Santos acquired a small interest in the adjacent Origin Energy operated Spring Gully CSG field, as well as the remaining 15% minority interests in the Roma gas fields, taking Santos’ ownership to 100%.
US HOLDINGS TO BE DIVESTED
Following a strategic review in 2006, Santos announced its intention to sell all of its United States holdings.
While Santos has a long history of involvement in the US upstream oil and gas sector, the Company believes that it will be better placed to meet its strategic objectives by redeploying capital into its other business activities in Australia, Asia and the Middle East.