Championing the cause of Australian oil and gas

One of Australia’s largest natural gas producers, Santos operates in all of the country’s mainland states as well as the Northern Territory. Its numerous exploration and production licences cover 152,360km of the continent: the largest portfolio of any company in Australia.
Aside from its domestic customers, Santos also supplies gas, oil and liquids to consumers in the greater Pacific region, and holds acreage in countries such as Indonesia, Papua New Guinea (PNG), Bangladesh and Vietnam.
Santos is involved in four major LNG projects within the region: the PNG LNG project, which was formally approved in 2009; Bonaparte LNG, a proposed floating LNG project in the Timor Sea; Darwin LNG, its first foray into LNG which began production in 2006; and its most current development, Gladstone LNG (GLNG) in Queensland.
GLNG
The US$18.5 million GLNG project was designed to convert CSG to LNG for export to global markets, and was the first venture of its kind to receive environmental approval from the Queensland Government. The project includes the development of CSG resources in the Bowen and Surat Basins in south-east Queensland and the construction of a 420km gas transmission pipeline from the gas fields to a plant on Curtis Island, which will house two LNG trains with a combined capacity of 7.8 million tonnes per annum.
The project’s joint venture partners – operator Santos (30 per cent), PETRONAS (27.5 per cent), Total (27.5 per cent) and KOGAS (15 per cent) – reached a final investment decision in January 2011.
According to Santos’ 2012 third quarterly activities report, the project remains on target for first production in 2015.
In the third quarter of 2012, 40 wells were drilled in the GLNG project’s acreage – including the Fairview, Arcadia, Roma and Scotia fields – and site preparations continued at the three upstream gas hubs at Fairview and Roma. In an investor presentation on November 22, Santos vice president
Queensland Trevor Brown said about 1000 wells would be brought online by the end of 2015, out of a total stock of 1300. Developments at the Curtis Island plant during the quarter progressed to schedule, with continued construction of the foundations for Train-1 and the beginning of construction at Train-2.
Preliminary works for the LNG jetty began late last year, and construction continued on the material offloading facility, haul road, on-site camp, and logistics facilities on the mainland.
In mid-December Santos began burial of the project’s 420km underground gas transmission pipeline, beginning in the Arcadia Valley in Central Queensland.
The pipeline was delivered to pipe yards in Gladstone in a series of shipments, with construction of the mainland pipeline beginning in August.
Santos vice president GLNG Mark Macfarlane said the burial of the pipeline was a step toward delivering first LNG in 2015.
“Over the past year we’ve seen the number of people working on our project approach 5000, with over 900 people working on the construction of the pipeline,” he said.
“We’ve made significant progress over the past few months – 75 kilometres of pipe has been strung in the Arcadia Valley and we have completed more than 1900 welding joints on the pipeline.”
When the pipeline workforce reaches total capacity in April, there will be 1300 people working on it, and it is expected to be completed in the second quarter of 2014.
Further expansions
In 2012 Santos sanctioned two new oil projects: Fletcher Finucane in the Carnarvon Basin offshore WA, and at the Dua oil field in Vietnam.
The final investment decision for the $490 million Fletcher Finucane development was reached in January 2012, and proposed a three well subsea tie-back to the existing Santos-operated floating production, storage and offloading facility (FPSO) at Mutineer Exeter. First oil production is expected in the second half of 2013, with an estimated average gross production rate of 15,000 barrels per day for the first year.
Santos vice president WA and Northern Territory John Anderson said the development would give new life to the company’s existing Mutineer Exeter asset.
“New oil production from Fletcher Finucane will extend the economic life of Mutineer Exeter by up to four years and it will give Fletcher Finucane and Mutineer Exeter participants more time to examine other opportunities within tie-back distance of the existing facilities,” he said.
In the same month that it announced the FID for Fletcher Finucane, Santos increased its investment in the development by buying the interests of Tap Oil for $18 million plus back costs incurred since July 1, 2011. Santos now holds 48 per cent aggregate interest in the project, in partnership with Kufpec Australia and JX Nippon Oil and Gas, with a funding obligation of $236 million.
Also in 2012, Santos’ Block 12W partners in the Nam Con Son Basin offshore Vietnam sanctioned the Dua field for development during the second quarter of the year. The Dua field is 17km from the Chim Sao FPSO, and will be developed as a subsea tie-back to the existing platform. First oil production is scheduled for the first half of 2014, with an estimated average gross production rate of between 8000 barrels per day and 10,000bpd during its first 12 months of production.
In line with Santos’ 31.9 per cent interest in Chim Sao, its share of Dua field capital expenditure is estimated at US$100 million. Other recent activities
Crown-1
In November 2012 Santos announced it had made a significant gas discovery at the Crown-1 exploration well, within the WA-274-P permit area in the Browse Basin offshore WA. Santos is operator of the permit and holds a 30 per cent interest, in joint venture partnership with INPEX (20 per cent) and Chevron (50 per cent).
Santos head of exploration Bill Overden said the discovery was a major boost for Santos.
“The Crown discovery is well positioned, in close proximity to existing and proposed LNG projects in the Browse Basin and other material exploration prospects,” he said. Santos also executed an agreement to take 30 per cent interest in the adjoining exploration permit WA-408-P, joining operator Total (50 per cent) and Murphy Oil (20 per cent). The WA-408-P joint venture committed to an initial drilling program, starting with wells at Dufresne-1 and Bassett West-1, following the completion of the Crown-1 program.
Mr Anderson said the deal would help strengthen Santos’ position in WA.
“The strong partnerships and the material prospectivity in this key offshore gas province positions Santos very well for the future,” he said.
“We look forward to the WA-408-P drilling programme.”
McArthur Basin
In December 2012, Santos signed a farm-in agreement with Tamboran Resources that allowed it to earn an interest of up to 75 per cent in Tamboran’s McArthur Basin permits 161, 162, 189 and 299 (A), which cover about 25,000 square kilometres of prospective shale gas and oil resource in the Northern Territory.
Under the terms of the deal, Santos immediately earned a 50 per cent operated interest in the permits through commitment of funding for a $41 million phase-one work program within three years. Following that program, Santos has the option to earn a further 25 per cent interest by providing $30 million for a phase-two work program which will include the drilling and testing of two wells. Santos also agreed to acquire a further 14 per cent interest in Tamboran for $10 million.
Mr Anderson said the permits were not only prospective for gas, but also for liquids.
“There’s also the added attraction of their proximity to critical infrastructure like a major highway, gas pipelines and a railway,” he said.
“The nearby Alice Springs to Darwin gas pipeline connects not only with major domestic users but also export markets.”
Moomba 191
In August 2012, Santos became the first company in Australia to begin commercial production of gas from a shale well, with a successful gas flow from its Moomba-191 well in the Cooper Basin.
Moomba-191 is a vertical shale gas well about 8km from the company’s Moomba gas plant in South Australia, and in its first month had an average flow rate of 2.7 million standard cubic feet per day from the Roseneath, Epilson and Murteree shale targets.
Bolstered by the success of its first commercial shale well, Mr Knox said Santos hoped to expand its Cooper Basin shale program.
“The data we have gathered from the well will be critical in the design of both our first horizontal shale gas well, which we plan to drill early next year, and the ongoing vertical well appraisal program, of which Moomba-191 is a part,” he said.
In a presentation on Cooper Basin unconventional gas delivered in November 2012, Santos estimated well and connection costs at $10 million for vertical wells (optimised for production), with an estimated recovery per well of between 3 billion cubic feet and 6bcf.
Santos has reported plans to undertake horizontal well technology trials and optimisation, as well as extensive fracturing trials in the Moomba REM shale and Nappamerri Trough. The company stated
that its objective was to deliver material commercial production between 2015 and 2016, with a view to underpinning Cooper Basin development beyond 2020.

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