Santos Ltd., the Australian gas producer planning an export project in Queensland, said it may delay an investment decision on the venture as it studies the government’s proposed new tax on resource profits.
Australia’s third-largest oil and gas producer is still confident it will be able to make an announcement “shortly” on customers for the liquefied natural gas venture, Chief Executive Officer David Knox said today.
Santos has previously said it aims to approve the first phase of Gladstone LNG by mid-2010 and to sanction a second unit 12 months later. More than A$50 billion ($45 billion) of investment is planned for the Queensland coal-seam gas industry, which is expected to generate 20,000 jobs, Chairman Peter Coates said at the company’s annual shareholder meeting in Adelaide.
“It is difficult to regard the tax proposals as anything other than bad news for the resources sector and thousands of Australians who work in it,” Coates said.
Santos rose 0.6 percent to A$12.99 at 3:25 p.m. in Sydney, while the benchmark S&P/ASX 200 Index declined 2.2 percent. News of the tax proposal had shaved about A$800 million ($724 million) off the company’s market value before trading started today, Knox said.
The expectation that Santos will approve the venture “this year,” as opposed to mid-year is a “small disappointment, but it’s not surprising that the target date has been pushed out a little bit,” Benjamin Wilson, an analyst at JPMorgan Chase & Co., said by phone from Sydney.
Some investors today are focusing on the positive comments about a potential customer, he said.
Santos and its partner, Malaysia’s Petroliam Nasional Bhd., are among companies planning Queensland ventures to convert coal-seam gas to liquid form. Santos owns 60 percent of the Gladstone LNG project, while Petronas, as the Kuala Lumpur-based partner is known, has 40 percent. More than a dozen proposed LNG projects in Australia are targeting Asian demand for cleaner-burning fuel.
“It is risky and unnecessary to introduce new taxes at a time when the Australian resources industry is set to underpin Australia’s prosperity for decades to come,” Coates told shareholders. Santos said it’s reviewing the tax plan and will work with the government to improve it.
A goal of making the first LNG deliveries from the Queensland venture in 2014 remains on schedule, Santos said. Progress on the development has been “substantial.”
Santos may sell at least a 15 percent stake in the LNG project to a buyer of the gas, Gordon Ramsay, an analyst at UBS AG in Melbourne, said in March. Tokyo Electric Power Co., Tokyo Gas Co. or Korea Gas Corp. are possible customers, he said.
Origin Energy Ltd., ConocoPhillips’ partner in a rival Queensland venture, said yesterday that the proposed tax would add a “significant” cost to the project and would potentially cause a delay to the development timeline. The project initially was estimated to cost about A$35 billion.