Santos Eyes More Cooperation With Rivals After BG Pipeline Deal

Santos Ltd. (STO), Australia’s third-biggest oil producer, and BG Group Plc (BG/) will connect their gas pipelines in Queensland as they seek cost savings by cooperating with neighboring liquefied natural gas projects.

Linking their pipelines at The Narrows Crossing on the Queensland mainland and on Curtis Island, where coal-seam gas will be converted into liquid form, will allow Santos and the Australian unit of London-listed BG to swap gas, Rod Duke, downstream vice president at Santos for the $18.5 billion Gladstone development, said today in a statement.

Adelaide-based Santos said the agreement with BG will probably be followed by more cooperation between companies working on LNG projects in the region. Santos, BG and a ConocoPhillips-Origin Energy Ltd. (ORG) venture are building three LNG developments in Queensland at a cost of more than $60 billion to tap rising Asian demand.

“We expect that this will be just one of many mutually beneficial arrangements across the industry in the future,” Duke said in the statement.

The pipeline links will be completed in 2014 and allow BG and Santos to continue gas field operations during LNG plant maintenance, Duke said.

“Ultimately it means the two companies will be able to buy, sell and swap gas at these points during scheduled and unscheduled events, therefore maximizing plant productivity,” he said in the statement.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

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

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