OIL and gas producer Santos has emerged as a potential circuit breaker in the standoff between Western Australia’s LNG developers and major domestic gas customers.
OIL and gas producer Santos has emerged as a potential circuit breaker in the standoff between Western Australia’s LNG developers and major domestic gas customers.
While LNG producers maintain there is plenty of gas available to local industry at commercial prices, domestic customers argue producers are solely interested in supplying the more lucrative LNG market.
They also argue the state’s domestic gas reservation policy must be tightened in order to force producers to make gas available to local users at affordable prices.
However, Santos WA vice-president John Anderson said his company had significant potential to grow as a specialist domestic gas supplier in WA and was actively pursuing a range of options to capitalise on those opportunities.
That could potentially include arrangements whereby Santos would take on some of the LNG producers’ domestic supply obligations.
“There have been some discussions, though nothing has come to pass yet,” Mr Anderson told WA Business News.
“But we will keep suggesting that we are quite prepared to ... (help) take care of their obligation.”
Santos’ approach was to work with both the LNG developers and WA government on measures “to accelerate that gas being brought on when it might not be the focus of those companies”.
Gas asset swaps, and LNG producer backing for third party domestic gas exploration and development are believed to be among the options under consideration.
Mr Anderson said making existing domestic gas processing capacity available to third-party gas suppliers, such as Santos, was also a possibility.
“We would have no problem bringing gas through someone else’s hub; we would be quite happy to develop gas to bring through the North West Shelf ... a Barrow Island hub or through existing facilities on Varanus Island,” he said.
“We are open to all of those suggestions.”
Santos has been aggressively building its WA presence this year, doubling its Perth-based staff to 60 and last week officially opening a Perth headquarters to manage all its WA and NT assets, including its Darwin LNG interests.
Additionally, it is already a substantial domestic gas producer in WA through its 45 per cent stakes in the Apache-managed East Spar and John Brookes ventures, which supply the Varanus Island gas plant, and its 45 per cent stake in the Reindeer-Devil Creek domestic gas project, due to start production in 2011.
It is also now evaluating options for its wholly owned Spar field, which holds around 500 billion cubic feet of gas.
Mr Anderson said Spar could either supply Varanus to offset declining supplies from the ageing Harriet joint venture, possibly as early as 2011, or underpin a stand-alone gas plant should other reserves be found nearby or become available.
Up to $50 million had also been committed for exploration in WA waters over the next year, starting with the East Spar East prospect, he said.
WA Domgas Alliance chairman Tony Petersen welcomed Santos’ domestic gas commitment but warned more flexible domestic supply mechanisms must lead to faster gas development to be worthwhile.
“In providing producers flexibility, the objective should be the delivery of additional domgas supply than might otherwise be the case,” he said.