Santos Expects Agreement With BG to Link LNG Project Pipelines

Santos Ltd. (STO), Australia’s third-biggest oil producer, expects to reach agreement with BG Group Plc (BG/) to connect their pipelines, bolstering the supply of gas for its $18.5 billion Gladstone project in Queensland state.

Linking their pipelines on the Queensland mainland and on Curtis Island, where coal-seam gas will be converted into liquid form, would allow the Santos and BG projects to swap gas, Rod Duke, downstream vice president for the Gladstone development, told reporters today on Curtis Island.

The proposed arrangement “allows for the sensible and commercial exchange of gas,” Duke said. It would also “facilitate ongoing cooperation in the future,” he said.

Santos, BG and a ConocoPhillips-Origin Energy Ltd. (ORG) venture are building three developments in Queensland at a cost of more than $60 billion to tap rising Asian demand for liquefied natural gas.

The arrangement with BG is an important step and would provide more certainty for gas supply to the Santos project, which is scheduled to start in 2015, said Nik Burns, a Melbourne-based analyst at UBS AG, who traveled to Curtis Island with Santos last week.

Santos is “close to finalizing arrangements” on exchanging gas with the Australian unit of London-listed BG, Duke told reporters.

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

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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