Santos Set to Approve $16 Billion Gladstone LNG Development in Australia

Santos Ltd., Australia’s third- largest oil and gas producer, is expected to commit to a $16 billion liquefied natural gas project in Queensland state, following rival BG Group Plc, analysts said.

Santos, whose shares were little changed yesterday at A$13.16, was halted in Sydney trading before an announcement about the Gladstone LNG project, the Adelaide-based company said in a statement today to the Australian stock exchange. Gladstone is about 550 kilometers (340 miles) north of the state capital Brisbane, which is experiencing its worst floods since 1974.

The Santos-led project is one of four on the central Queensland coast planning to liquefy gas extracted from coal deposits for shipment to Asia. BG Group Plc, the U.K.’s third- largest gas producer, said Oct. 31 it would build the Queensland Curtis LNG development at a cost of $15 billion.

Benjamin Wilson, an analyst at JPMorgan Chase & Co. in Sydney, and David Brennan, an analyst at Daiwa Capital Markets in Melbourne, said they expect Santos to announce a final investment decision to advance with the LNG venture.

“It’s all down to project execution now,” Wilson said. Due to labor competition, it’s important to approve engineering and construction contracts “as quickly as possible.”

The Santos venture at Gladstone aims to begin exports in 2015, generating an average of $6 billion in annual revenue, the company said last month. The project has combined supply agreements worth more than $120 billion, Santos said.

Santos will own 30 percent of the LNG project, while Kuala Lumpur-based Petroliam Nasional Bhd. and Paris-based Total SA will each own 27.5 percent. Korea Gas Corp. will have 15 percent.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.