In 2007, Santos reached a strategic turning point, with a goal to gain exposure to global prices for the company’s large-scale gas resources.
While the company’s traditional focus had been on the domestic Australian market, opportunities were opening up overseas, particularly in Asia where, as a Santos spokesperson told Gas Today, “gas could be sold at higher prices because the demand was growing strong, and there was enough gas to make export viable”?.
With Asian Pacific LNG forecast to increase at a compound annual growth rate of 4 per cent, this presented a unique opportunity for Santos, along with a number of other companies beginning to eye opportunities opening up in the Asian market, namely Origin Energy and QGC.
The pivotal point, however, for the overarching GLNG strategy was a Santos-owned and operated LNG plant in Gladstone, piping CSG from the Fairview, Scotia and Roma gas fields in Queensland to the plant on Curtis Island, near Gladstone, where it is cooled to minus 161 degrees Celsius to become liquefied for export.
At the time the final investment decision being made, the GLNG Project was billed as the world’s first large-scale project to convert CSG to LNG – although this title has since gone to BG Group’s Queensland Curtis LNG (QCLNG) Project, which shipped first LNG on 4 January 2015.
The GLNG Project was set to take its place alongside Santos’s first LNG project (the already producing Bayu-Undan-linked Darwin LNG plant) and a proposed LNG development in Papua New Guinea (the ExxonMobil-operated PNG LNG Project) which came online ahead of schedule in 2014 and continues to perform well beyond expectation.
THE PATH TO SUCCESS
In September 2007, David Knox joined the Santos team as Executive Vice President of Growth Businesses.
Mr Knox had the global experience required to get a project like GLNG off the ground, coupled with an intimate knowledge of the Asian Pacific oil and gas landscape. Two weeks after Mr Knox joined the company, the Gladstone LNG Project was officially announced.
After six months at Santos, Mr Knox stepped in as Acting Chief Executive Officer before announcing that the global LNG giant PETRONAS would partner with Santos in the project.
A defining moment for the project,
a 40 per cent stake in the project was sold for AU$2.5 billion, the company’s largest transaction to date.
The GLNG Project was formally sanctioned in January 2011, underpinned by binding 20-year LNG supply contracts to PETRONAS and KOGAS for 7.2 MMt/a of LNG in aggregate, which will see Santos ultimately deliver about 11 per cent of Korea’s domestic gas needs and around 9 per cent of Malaysia’s demands for the next 20 years.
When fully operational, the project will have the capacity to produce up to
7.8 MMt/a of LNG.
Its contribution to the local economy has also seen more than AU$15.4 billion invested Australia-wide, with AU$7.9 billion in Queensland alone.
Once the project is fully operational it will load two ships per week on average, or more than 100 ships per year.
Bringing in expertise from around the globe, Santos recruited some of the world’s oil and gas majors to develop the project.
Santos, an Australian energy company and pioneer in the Australian oil and gas industry since it was founded in Adelaide in 1954, was joined by Malaysia’s national oil and gas company, PETRONAS.
The joint venture also included Total, the world’s fifth-largest publicly traded integrated oil and gas company, and KOGAS, the world’s largest buyer of LNG.
Joint venture interests in the project are Santos (30 per cent) and PETRONAS (27.5 per cent), Total (27.5 per cent) and KOGAS (15 per cent).
THE FIRST SHIPMENT
The hard work of those involved finally paid off on 16 October 2015, with the project’s first LNG cargo shipped to South Korea on the Seri Bakti.
Speaking at the launch, Mr Knox said the development was the culmination of a historic journey for Santos.
“Successfully delivering our first operated LNG project is a testament to our dedicated employees and contractors, the support we have received from governments, local communities, our customers and shareholders, as well as the strong relationships we enjoy with our joint venture partners,”? Mr Knox said.
“This is the largest project we have ever undertaken as a company and I am so proud that we have been able to deliver this on time and within budget.”?
Australian Petroleum Production and Exploration Association CEO Malcolm Roberts said the event was another reminder that Australia is on track to become the world’s leading LNG producer by 2018.
“While the oil and gas industry faces the same headwinds as other commodities, we are resilient enough to fend off the latest industry challenges,”? Dr Roberts said.
“The International Energy Agency predicts the world gas market could grow by around 30 per cent by 2030. Other producers are emerging. Our challenge now is to stay competitive.”?
Production from the first GLNG train commenced in September, with Train 2 expected to be ready for start-up in early 2016.