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Kathryn Mitchell Andrew Seaton
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Santos today announced a proposal to construct a liquefied natural gas (LNG) facility at Gladstone in Queensland, which would see coal seam gas processed and sold into export markets.

The proposed Gladstone LNG project is for a 3-4 million tonnes per annum LNG processing train and associated infrastructure which is expected to cost a total of A$5-A$7 billion.

In a separate statement (attached) the Premier of Queensland, the Hon Peter Beattie MP, gave his support to the project and announced the granting of significant project status.

The announcement follows extensive feasibility and site selection studies over the past 18 months, which have culminated in an agreement with the Port of Gladstone Authority for Santos to secure a site to construct a LNG export facility on Curtis Island.

Commenting on the announcement Santos’ Managing Director, Mr John Ellice-Flint, stressed the significance of the project to both Santos and Queensland, and the importance of the Government support as evidenced by the granting of a significant project declaration by the Coordinator-General.

“This is a landmark project for Santos which will underwrite the continued growth of the coal seam gas industry in Queensland and is a major step forward in the development of a new export industry for the state,” he said

“Gladstone LNG is a natural extension of Santos’ core gas business, in line with our strength as Australia’s largest producer of domestic natural gas, including coal seam gas.

“Queensland has the majority of Australia’s abundant CSG resources. Santos’ CSG reserves and contingent resources currently total over 5,000 petajoules with significant upside potential.

“Constructing and operating major onshore gas installations is a core competency for Santos, and we are already involved in the LNG industry by virtue of our interests in Darwin LNG, the most recent greenfield LNG project constructed in Australia.

“Santos is committed to building a diverse LNG supply portfolio, as demonstrated by Darwin LNG, our strong support for a PNG LNG project and now Gladstone LNG.

“Conceptual engineering and preliminary financial analysis have confirmed that Gladstone LNG will generate acceptable rates of return for shareholders, whilst at the same time providing significant benefits for Queensland in terms of employment and royalties,” he said.

Key parameters for the proposed facility are:

  • A single processing train of approximately 3-4 million tonnes per annum of LNG;
  • Capital costs in the range of A$5-A$7 billion, including upstream field development, liquefaction plant and associated infrastructure. Half of the investment is expected to be in the Gladstone plant, with the other half in regional Queensland’s Bowen and Surat Basins;
  • Final Investment Decision by the end of 2009 to enable first cargoes to be exported in early 2014;
  • Gas supply of 170-220 PJ per annum sourced from Santos’ CSG fields in Queensland’s Bowen and Surat Basins.

Following today’s important steps of securing Government support and a suitable site, the next steps include:

  • Appointment of a suitable engineering contractor to undertake detailed engineering studies;
  • Continued accelerated exploration and appraisal drilling program to prove up additional CSG reserves;
  • Completion of planning and environmental studies, including community consultation processes;
  • Preliminary LNG marketing.

Santos has a significant investment in CSG and produces approximately 25% of Australia’s CSG. In 2007 Santos will invest approximately $150 million in expanding its CSG business. In addition, subject to Gladstone LNG project progress and Santos Board approvals, the Company expects to invest a further $200 million to progress the project during 2008.