Santos Ltd., Adelaide, has taken a $1.5-billion write-down on the value of its Gladstone LNG (GLNG) project that sources gas from coal seam gas fields in the Surat-Bowen basins to supply an LNG plant on Curtis Island near Gladstone.
The company said the hit followed a review of key production assets and the decision to make the impairment charge was attributed to lower oil prices, a slower-than-anticipated ramp-up in coal seam gas production from its fields, and higher gas purchase prices from other companies on Australia’s east coast.
The impairment charge on the $18.5-billion GLNG project is on top of the $565 million pretax write-down on the project last February.
Santos Chairman Peter Coates said the impairment charge was “clearly disappointing, but it is a consequence of the challenging environment which we now face.”
He said, “We have decided to adjust our long-term operating assumptions for GLNG to reflect the reality of the current oil-price environment.”
Santos said the noncash charge will result in an aftertax impact of $1.05 billion on the company’s half-year profits, but it will not affect the debt facilities.
Production began at GLNG in September 2015 from Train 1. Train 2 came on stream this past May.
Santos is operator of the project with 30%. Other stakeholders are Petronas of Malaysia, Total SA of France, and Kogas from South Korea.