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Speaking at the Santos Ltd Annual General Meeting held in Adelaide today, the Chairman, Mr Stephen Gerlach said that a new and vigorous growth profile for the Company is starting to take shape.

“The strategy that we released twelve months ago was aimed at growth. I am pleased to say that we are getting runs on the board, particularly in exploration and gas commercialisation. The outlook for 2002 is also positive. While the oil price is always uncertain, we are on track to achieve our production growth targets”.

ExplorationOn exploration, Mr Gerlach said, “Santos has enjoyed good exploration success over the last year. We have had four Santos-operated offshore oil discoveries, the best result ever”.

These are:

  • Oyong-1, offshore Java,
  • Corowa-1 (Carnarvon Basin)
  • Norfolk-1 (Carnarvon Basin); and
  • Exeter-1 (Carnarvon Basin), which was announced yesterday.

While further appraisal work is necessary, these discoveries all form the basis for possible commercial development and could make a significant difference to Santos’ future growth profile.

Managing Director Mr John Ellice-Flint said, “ These results are very encouraging. Successful oil exploration like this is the most powerful way of increasing shareholder value. We are already doing appraisal work to assess prospects for rapid development”.

There has also been continuing good success with exploration in the United States and in the Cooper and Otway Basins.

Bayu-Undan Gas CommercialisationThere has been another important recent development, with positive implications for Santos, concerning the Bayu-Undan gas/liquids field in which Santos has a 12% interest. Phillips Petroleum, the Operator, has recently announced Heads of Agreement for the sale of gas from the Bayu-Undan field as LNG.

The gas development is subject to Australian Government approval of the fiscal terms.

Mr Gerlach said, “This has the potential to be very significant for Santos. At one stroke it could commercialise more than 10% of our proved and probable gas reserves. We are hopeful that the Australian Government will shortly agree the fiscal terms.”

Papua New GuineaMr Gerlach reiterated Santos’ support for the PNG gas and pipeline project. “We support it. Our position of support has, for some time, been well known to the Operator, ExxonMobil. We have been in discussion for some months regarding re-entering
the project”.

Gas StrategyThe Managing Director, Mr John Ellice-Flint addressed Santos overall gas strategy. Altogether gas contributes around 40% of Santos revenue, with 60% from oil and liquids.

He said that, “Santos has spent the last decade diversifying its gas interests. We already produce gas in Eastern Queensland, East Spar, the United States and the Otway and Amadeus Basins, in addition to the Cooper Basin”.

“We have recently developed Scotia, a coal seam methane field in Eastern Queensland. This field is now ready to supply gas to the Swanbank Power Station”.

“Going forward we aim to continue this diversification and we have the asset base in place to achieve it. Altogether we have about a dozen potential gas projects outside the Cooper Basin, split fifty/fifty between international and domestic markets. We are already spending money on around half of them”.

This will include further diversification into overseas markets and LNG. The demand for gas in countries such as the United States is growing, there is growing international trade in gas and higher margins achievable in other countries.

“For producers, Australia continues to have some of the lowest gas prices in the world. On an equivalent energy basis, gas prices are around one-third of oil prices. This, combined with high and rising costs, puts pressure on Australian margins”.

The Bayu-Undan LNG project marks one form of diversification into international markets.

The Santos acquisition of US exploration energy company, Esenjay, is another type of international diversification. This provides gas production, reserves and a large number of exploration prospects ready to be drilled.

Mr Ellice-Flint presented the Company’s baseline gas production profile out to 2015. This is based on Santos existing proved and probable reserves and contingent resources. It excludes possible reserves, exploration and acquisitions.

It demonstrates continuing strong gas production, with upside from exploration and acquisitions.

2002 OutlookMr Gerlach said that the Company’s outlook for 2002 is positive.

Santos is on track to increase its annual production from its existing production base by around 3% in 2002. In addition, we expect that the acquisition in the USA will add 0.5 million boe of production during the year. The first quarter production was 13 million boe, slightly ahead of first quarter 2001.

The Company’s financial results for the year will depend on oil prices.

Santos’ after tax earnings vary by around A$23 million for every US$1 change in the oil price over a year. The average oil price received during the First Quarter was US$20.75 compared with US$25.23 per barrel in 2001.

Oil prices dropped significantly after 11 September but have strengthened in recent weeks.

The AGM presentations are available at www.santos.com

For further information contact Graeme Bethune, General Manager Finance and Investor Relations on (08) 8218 5157 or 0419 828 617.

Santos stock symbols: STO (Australian Stock Exchange), STOSY (NASDAQ ADR)