Santos (ASX: STO) has brought forward US$2.5 billion (A$2.48 billion) of upstream capital expenditure for the Gladstone liquefied natural gas project to optimise gas supply into the gas liquefaction trains.
This will result in the drilling of 300 additional coal seam gas wells in the Fairview and Roma areas in Quensland, allowing the GLNG joint venture to sell more LNG cargoes during its initial phases.
As a result of the change, GLNG’s upfront costs have increased to US$18.5 billion.
Santos, whose 30% share of the added costs comes up to US$750 million, further claimed the move would address the challenge of upstream field deliverability in the early stages of project ramp-up.
It also denied that it was aimed at securing more gas supply.
Santos added that it will fund its share of costs from internal resources without turning to equity raisings or debt.
The news comes as the GLNG coal seam gas to LNG project remains embroiled in concerns that it might not have enough gas its requirements.
GLNG had previously reached a deal to purchase 350 petajoules of gas over 10 years with fellow CSG-LNG player Origin Energy (ASX: ORG) and has flagged that it remains in talks with third parties for further gas supply.
It had also reached in 2010 a deal to supply 750 petajoules of gas from its existing uncontracted Cooper Basin gas reserves into GLNG.
Excluding the Origin deal, the GLNG project held proved and probable reserves of 5268 petajoules of gas, enough for at least 13 years of supply into the project.
GLNG progress
Progress on the GLNG project has been proceeding well with more than 440 wells drilled to date and 640 landholder agreements in place.
Construction of pipelay camps has already started while about 90% of the required pipeline to bring gas from the GLNG fields to Gladstone, Queensland, have been completed. Pipelay work is expected to start later this year.
Construction of the LNG plant on Curtis Island, Gladstone, is also progressing on schedule with more than 85% of the bulk earthworks now complete.
The 2 train project will be capable of producing 7 million tonnes of LNG per annum with first LNG cargoes expected to ship in 2015.
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