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Santos Looks at Darwin Pipeline After Shelving Floating LNG Plan

Santos Ltd. (STO) is considering sending natural gas through a pipeline to the northern Australian coast to feed a potential expansion of ConocoPhillips’s export project after shelving plans to process the fuel at sea.

Santos also is looking at piping gas from the Petrel, Tern and Frigate fields to Darwin in the Northern Territory to supply the first phase of the ConocoPhillips plant, which started in 2006, John Anderson, Asia and Western Australia vice president for Adelaide-based Santos, said today by phone.

“I’m not saying Petrel, Tern and Frigate could have enough gas to fully meet the requirements of an expansion of Darwin, but they could play a material role,” he said.

Santos, Australia’s third-largest oil and gas producer, and Paris-based GDF Suez SA (GSZ) today shelved a plan to use a ship to turn gas into liquid offshore and will seek alternatives. The companies determined that the Bonaparte floating LNG project wouldn’t be profitable enough to go ahead with the proposal.

Australia has seven LNG ventures under construction, putting the country on course to surpass Qatar as the world’s biggest supplier of the fuel. Another A$180 billion ($170 billion) of potential investment is under threat due to high costs and increasing competition, according to the Australian Petroleum Production and Exploration Association.

‘Economic Enough’

“For these fields and the development we were looking at, this was not seen to be economic enough for the venture,” Anderson said. “FLNG is a technically strong concept. We didn’t see any technical show-stoppers.”

Options for the gas also include supplying a potential expansion of the Ichthys LNG development led by Inpex Corp. or linking to Eni SpA’s Blacktip project, Anderson said. Santos is ConocoPhillips (COP)’s partner in the Darwin LNG development.

Santos and GDF Suez were among companies planning to follow Royal Dutch Shell Plc (RDSA) in developing projects to convert gas into liquid offshore. Woodside Petroleum Ltd. now plans to use Shell technology for its Browse project.

Santos last year said that it expected an investment decision on whether to go ahead with Bonaparte LNG in about 2015. Citigroup Inc. estimated last year that the project would probably cost $8 billion to $10 billion to develop.

The companies won’t take the Bonaparte floating LNG proposal into the engineering and design phase at this point, Santos said today. Santos holds 40 percent of the project and GDF Suez has 60 percent, according to the statement.

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

To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Indranil Ghosh, Alex Devine

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