ConocoPhillips, Santos LNG Projects Will Swap Gas to Lower Costs

ConocoPhillips (COP) and Santos Ltd. (STO), developing separate liquefied natural gas projects in Australia at a cost of more than $40 billion, agreed to share pipelines and exchange gas to reduce costs and duplication.

The projects in Queensland state will build two pipeline connection points and sign gas-swap agreements, according to a joint statement today from Adelaide-based Santos and ConocoPhillips’s partner, Sydney-based Origin Energy Ltd. (ORG)

ConocoPhillips and Origin are building a A$24.7 billion ($24 billion) project to liquefy natural gas for shipment to Asia, while Santos is developing an $18.5 billion development. Australia, forecast to become the world’s largest supplier of LNG with seven projects under construction, is facing rising costs that threaten expansions.

Without the agreement, the projects would need 140 kilometers (87 miles) of additional pipelines and multiple connection points to send their gas to plants on Curtis Island for processing for export, according to the statement.

Both the Australia Pacific LNG project, led by ConocoPhillips and Origin, and the Gladstone LNG venture, operated by Santos, are due to begin exports in 2015. BG Group Plc is building a third LNG project in Queensland, and Arrow Energy Ltd., owned by Royal Dutch Shell Plc and PetroChina Co., is considering a fourth development.

Santos and BG’s Australian unit, QGC Pty, reached an agreement in July to link pipelines on the Queensland mainland and on Curtis Island, where the plants that process coal-seam gas into LNG are based. Connecting the pipelines will allow the developments to buy, sell and swap gas at those points.

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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