Compensation
Compensation for exploration
Santos’ development of natural gas resources has two distinct stages; exploration and production. We have developed a program, which compensates landholders at both stages.
The exploration stage involves the drilling of core holes to assess the geology and coals of a specific area. This is a short-term phase usually lasting 6-8 weeks, after which the site is completely rehabilitated.
The exploration stage may also include an appraisal program involving the construction of pilot wells to demonstrate gas and water flow rates. A pilot is usually in operation for between 3-18 months and may then be converted to a production well.
Compensation for these activities will be paid on the following basis:
First year
Land Value x Area Utilised x 1.2
Land Value means the value of the property (per m2) as stated on the private landholder’s Land Rates Notice.
Area Utilised means the number of square metres of a private landholder’s property impacted by any installation of wells, dams, new access roads or other equipment that may be required.
Fee for Service $30,000
When we undertake activities on private properties, we realise landholders prefer to keep our attendance to a minimum.
We will seek their help in simple monitoring and upkeep of our facilities and will pay this fee for their time.
Second year and onwards
Land Value x Area Utilised x 0.6
Example: For a 1 hectare surface facility on land valued at $6,000 per hectare ($0.60/m2) for the next three years:
Year 1 = $0.60 x 10,000m2 x 1.2 = $7,200
Year 2 = $0.60 x 10,000m2 x 0.6 = $3,600
Year 3 = $0.60 x 10,000m2 x 0.6 = $3,600
Fee for Service $30,000 per annum.
Compensation for Production
The production stage occurs once exploration and appraisal have been completed and the additional regulatory approvals have been sought by and granted to Santos. A production well has an average life of approximately 20-30 years.
Compensation during production will be paid on the following basis:
First year
Land Value x Area Utilised x 1.2 (as with exploration).
Fee for Service $30,000
Second year and onwards
Landholder Incentive Fund x Landholders Percentage of Total Private Surface Area
In recognition of the landholder’s support in the activities leading up to and during production, Santos is setting up a new fund which enables the landholder to share in the long term benefits of the development.
The Landholder Incentive Fund will be an annual amount equal to 5% of Santos’ royalty payments associated with private land within a production licence area. Based on our estimated production volumes this could exceed $150 million over 20 years.
Landholders Percentage of Total Private Surface Area means the proportion of a private landholder’s property utilised by Santos as compared to the total area used for our operations.
Fee for Service $30,000 per annum will continue to be paid until activities on the landholder’s property cease and the site is rehabilitated.
Compensation estimates
Exploration compensation*
| Year 1 |
$0.60 x 10,000m2 x 1.2 = $7,200
Fee for Service: $30,000 |
| Total |
$37,200 |
| Year 2 |
$0.60 x 10,000m2 x 0.6 = $3,600
Fee for Service: $30,000 |
| Total |
$33.600 |
Production compensation*
| Year 1 |
$0.60 x 10,000m2 x 1.2 = $7,200
Fee for Service: $30,000 |
| Total |
$37,200 |
| Year 2 |
Landholders Percentage of Total Project Surface Area
x Landholder Incentive Fund |
| Total |
$50,000 to $70,000 (estimated figures) |
*Estimates based on a one-hectare surface facility on land valued at $6,000 per hectare ($0.60/m2)