Santos forecasts slump in gas and oil production

Santos LNG Project, Queensland Image credit: flickr User: santosglng

Major gas producer Santos has warned that full year gas and oil production will reach the low end mark of the company’s estimates of 52 to 55 million barrels of oil equivalent (mmboe).

Image credit:
Image credit: Santos Twitter

Australian gas customers accuse Santos for inflated oil and gas prices, having paid $5.98 a gigajoule in the September quarter. The negative trend has seen Australian businesses fear future unaffordable price rises, according to The Australian.

The gas and oil prices have almost reached export parity levels commanded by large gas and oil producers when they export liquefied natural gas (LNG) to Asian importers.

Furious Australian gas users, such as Orica and Alcoa, have requested that the government reserve gas supplies for domestic use before Queensland’s $70 million suite of LNG export projects becomes operational again.

The country’s biggest manufacturing group laid the blame on Santos’ shoulders, accusing them of stockpiling gas supplies to export overseas at premium prices.

Santos, however, pointed the finger at customers from Western Australia– the only state that imposes the gas manufacturers with a rule to set aside reserves– claiming that they are responsible for the 10% increase in prices compared to last year.

Mark Taylor, analyst for Morningstar Resources, pointed out that the Santos’ production report together with rising east coast prices will give a better idea of where prices might end up.

“It has been one of the country’s competitive advantages: low cost energy, but we’re going to be paying the same as the rest of the world pays,” he told AAP.

“It’s going to be a meaningful impost.”

Mr. Taylor also commented on the main beneficiaries of the situation.

According to him, high prices enabled Santos to greatly benefit on these circumstances, as the company has low expenditure need for existing domestic infrastructure and stands to get a huge uplift from their involvement in the PGN and Gladstone LNG projects.

High oil prices and highest production levels in six years have seen the company register record-breaking revenue of $1.03 billion in the three months to the end of September, which is an increase of approximately 20% compared to the same period a year ago.

However, Santos’ quarterly production of 13.4 million mmboe is 1.0 lower than in the third quarter of 2012, which caused a drop in the company’s share value by 16 cents, or 1.1 %.