Santos' Gladstone Lng Leaps Ahead
The Age
Wednesday April 9, 2008
SANTOS' acting managing director and contender for the top job, David Knox, has been quick to put his stamp on the company.
He has injected fresh momentum into the group's proposed $7.7 billion Gladstone liquefied natural gas export project - one of four proposed, and all of which are based on coal-bed methane gas.Mr Knox assumed daily running of the Adelaide-based group after last month's surprise retirement of John Ellice-Flint after seven years as managing director.Keen to demonstrate a can-do attitude to the Santos board and the market before the permanent replacement for Mr Ellice-Flint is found, Mr Knox's first action has been to swing the Gladstone project into the preliminary design stage.Two engineering companies - Foster Wheeler and Bechtel - have been given six months to come up with separate design proposals for the project, one based on coal-bed methane rather than the traditional LNG project reliance on natural gas supplies.The best of the proposals is expected to lead to a final investment decision by the end of next year, and first LNG cargoes early in 2014.But the cost of getting to that point is 10% more than the originally forecast $7 billion - itself at the higher end of the $5-7 billion price tag that Santos first fixed to the project.And Santos has yet to secure a partner, one that will deliver the technical support for what could be the world's first LNG project based on coal-bed methane.Shell has previously indicated it is interested in getting involved in the coal-bed methane/LNG business. Other potential partners would include the full range of global LNG producers, given that it is shaping as a low-cost alternative to traditional LNG projects.The interest of the global players in Queensland's coal-bed methane/LNG potential is reflected in the four projects proposed by Santos, Queensland Gas Company/BG, Arrow Energy and Sunshine Gas.A research note by broker UBS revising the value of the project to Santos before yesterday's move underpinned an increase in the company's valuation from $13.97 a share to $15.91 a share. Santos shares closed 10? lower at $15.14.The reporter owns Santos shares.KEY POINTS ? Proposed $7.7 billion export project is based on coal-bed methane gas.? Potential project partners would include the full range of global LNG producers.
© 2008 The Age
