Related News:
Santos Gas Venture May Face Delays in Environmental Approval, Analysts Say
Santos Ltd. may face a further delay in winning government approval for its $15 billion liquefied natural gas project in Australia after Prime Minister Julia Gillard assembles a new cabinet, analysts said.
Government clearance for the Gladstone LNG venture, expected in October, may be deferred because of a potential change in environment ministers and Greens Party concerns about water extracted from coal seams, Jason Mabee, an analyst at Royal Bank of Scotland in Sydney, wrote in a report today. Even so, “we struggle to see this being a deal breaker,” he said.
Santos, BG Group Plc and Origin Energy Ltd. aim to commit by the end of the year to Queensland LNG projects that will rely on coal-seam gas and target Asian demand for cleaner-burning fuel. Total SA, Europe’s third-largest oil producer, agreed to buy 20 percent of the Santos venture for more than A$860 million ($790 million), the Adelaide-based company said yesterday.
Santos fell 3.1 percent to A$12.39 at 1:16 p.m. in Sydney, compared with a loss of 0.2 percent for the benchmark S&P/ASX 200 Index. That follows a drop of 7 percent yesterday after Santos announced the Total deal. Santos partner Petroliam Nasional Bhd. sold Total a 5 percent project stake.
Government approval may depend on who Gillard puts in charge of the portfolio, Andrew Williams, an analyst at Credit Suisse in Melbourne, said in a report today. In July, Environment Minister Peter Garrett deferred by three months decisions on the Santos and BG projects. Garrett is expected to move from the position, the Age newspaper reported today, without citing anyone.
Water ‘Risk’
“This date could very easily be pushed back, with parties remaining continuing to work through resolving water issues,” Williams wrote. He said he sees “this as an area of risk.”
Garrett extended a review of the Queensland LNG ventures until Oct. 11. While Queensland’s state government approved the gas projects, its Coordinator-General Colin Jensen raised concerns that the “significant” amount of water and salt extracted in the process of producing the gas could pose environmental risks.
Santos sold a 15 percent stake to Total for A$650 million, a “weak price,” Macquarie Group Ltd. analyst Adrian Wood wrote in a report today. Santos may need to raise as much as A$2.5 billion selling shares, the Sydney-based analyst said.
Santos still targets October environmental approval before a development decision on the LNG venture’s first phase later in the year, Chief Executive Officer David Knox said by phone yesterday.
No ‘Show Stoppers’
Australia’s third-largest oil and gas producer has been working with the environment department staff and “there haven’t been any show stoppers,” Knox said. Santos has been active in the region for four decades and “demonstrated we can do it sustainably, and we intend to do it for the next 40 years.”
The Santos venture, with two production units, may cost A$16.4 billion, Deutsche Bank has estimated.
The Labor Party’s Gillard held on to power as Australia’s prime minister after winning support from three independent lawmakers and a Greens Party member to reach a majority of 76 seats. Gillard was forced to negotiate power-sharing agreements with the legislators after losing her party’s overall majority in the Aug. 21 election.
To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.
Rate These Stories
Rate this Page