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Santos to delay investment decision on Gladstone LNG project

Oilfield Technology,

Santos LNG’s CEO, David Knox, pointed out that the Australian government’s announcement of a 40% super resource tax had effectively reduced the value of its shares by US$ 800 million. But he reassured shareholders that the company would vehemently oppose the proposed new tax, on the grounds that Santos has already been paying between 40 - 50% of pre-tax profits to the government in royalties and taxes, over the last decade.

Santos is in a very strong position, with Asian demand for LNG projected to double to 200 million tpa of LNG in the next 15 years. This should create a gap between supply and demand, allowing for a significant investment in building a material LNG portfolio.

However, the announcement of the super resource tax by the government on Sunday has shaken investor confidence and led companies to re-evaluate their decisions. Santos does intend to make a final investment decision on the Gladstone LNG project in this year though.

The GLNG project is a two train LNG liquefaction plant, which will take coal seam gas from Eastern Queensland and liquefy for export to Asian customers. It has a projected cost of US$ 15 billion.

“This will allow us to use the next few months to carefully consider the government’s tax changes announced on the weekend, including seeking clarity from the government regarding important details not included in Sunday’s announcement,” said David Knox.

However, he was confident that a final decision would be made, saying, “We have made excellent progress on our design studies. Upstream engineering design is complete and we will shortly make an announcement on the successful upstream contractor.” He went on to say, “On the marketing front, we have a binding offtake agreement to sell 2 million tonnes per annum of LNG to Petronas.”

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