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Bayu-Undan LNG Gas Agreement

Bayu-Undan LNG Gas Agreement Signals Positive Development for Santos and Australian Natural Gas Resources

Santos welcomes the recent Bayu-Undan LNG announcement by Phillips Petroleum of a 3 million tonne per annum Heads of Agreement with Tokyo Electric Power Company and the Tokyo Gas Company. This will be Santos’ first investment in an LNG project and is an important step towards commercialising the vast gas resources located in the Timor Gap/Timor Sea.

In the 2001 Santos Annual Report (released today) John Ellice-Flint, Santos’ Managing Director discusses the opportunities for Australia and Santos from the development of Northern Australia’s substantial natural gas resources. An extract from the Santos 2001 annual report titled “Looking Ahead: The Opportunities for Australia” is attached.
Santos strongly supports Phillips Petroleum (91-12) Pty Ltd, the operator of the Bayu-Undan liquids and gas development, in seeking the Australian government’s endorsement of the fiscal terms agreed with East Timor on 21 December 2001.

Significantly for Santos the development of the Bayu-Undan gas reserves will result in the transfer of approximately 190 billion cubic feet or 33 million boe of Proved and Probable reserves to Proved reserves subject to completion of the sales contracts and further appraisal work. This would increase proved reserves by 10%, compared with the 2001 year end level of 316 million boe. The Bayu-Undan LNG project would also add approximately 18 PJ (3.1 million boe) per annum to annual Santos production. Combined with the liquids project, the Bayu-Undan development will contribute approximately 6.5 million boe to total Santos annual production.

The announcement of the Bayu-Undan LNG development also opens up opportunities for Santos to develop its other interests in the Timor Sea.

Santos has interests in the Evans Shoal and Petrel and Tern gas fields. The net interest in these fields is about 4 Tcf of best estimate gas resources, equivalent to 620 million boe.