Mining and Heavy Industries

Santos to export a fifth of available gas

Australian gas consumers are pressuring producer Santos to act after a Wood Mackenzie report suggested the company’s new GLNG export project in Queensland could soak up around 20% of the gas available in the national market.

Wood Mackenzie’s report came after Prime Minister Malcolm Turnbull reportedly convinced Queensland’s other two new major gas exporters, Shell and Origin/ConocoPhillips, to sell more gas to the domestic market than they export.

Santos, however, is relying on third party gas for its massive GLNG export facility, raising concerns it could further expose domestic gas buyers to the international market.

“GLNG is in a difficult spot here,” Wood Mackenzie analyst Saul Kavonic was quoted by the AFR.

“Having to choose between complying with the pressure to supply to the domestic market, and maintaining gas feedstock to salvage what value it can from its investment in GLNG.

“And as long as GLNG keeps hoovering up gas from the domestic market, it is a struggle to see how additional domestic gas supplies from the neighbouring LNG projects will alleviate the shortage.

“Those volumes may just end up being exported via GLNG anyway.”

Current estimates have Santos relying on third party gas for 40% to 50% of its export capacity at GLNG over the next five years. That would soak up roughly 20% of the gas that is expected to be available on the east coast in that time.

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