SANTOS SEEKS MORE AUSTRALIAN GAS SALES

Santos Ltd. is pressing a campaign to find markets for its uncommitted gas reserves in Australia.

The Adelaide, Australia, operator is trying to build upon existing gas markets in South Australia and New South Wales and develop new markets, mostly in Queensland, Santos Chairman S.D.M. Wallis told stockholders at the company's annual meeting.

Wallis expects the company's 1992 production to be close to 1991's 34 million bbl of oil equivalent. Increased gas sales this year are expected to partly offset lower oil prices and sales volumes.

Excluding allowance for exploration successes, Santos' oil production in Australia's Cooper basin this year is expected to reach 6.3 million bbl, about 17% less than in 1991. Much of that decline will be offset by increased production from the Timor Sea, where production from Skua oil field is expected to ramp up to 25,000 b/d in its first full year of operation.

Meantime, Santos is juggling its portfolio of exploration acreage by adding interests in frontier areas to interests in mature areas like the Cooper basin and the U.S.

As a result, more exploration efforts will focus on international prospects. By 1993, 40% of the company's exploration budget will be spent outside Australia, up from only 19% in 1991.

Santos also is considering acquisitions of producing and undeveloped reserves in Australia, U.S., and North Sea. Wallis said acquiring producing reserves overseas often opens regional exploration opportunities.

NATURAL GAS

Wallis said uncommitted Santos gas reserves position the company to serve Australia's growing gas markets. Among its gas holdings are more than half the 1.1 tcf of uncommitted reserves in the Cooper basin, 2.4 tcf of uncommitted reserves in the offshore Bonaparte basin, and 25% of 650 bcf of uncommitted reserves in the Amadeus basin.

Wallis said the South Australia government wants to extend its supply cover, raising the possibility of selling gas under long term contracts to customers in Adelaide. Those reserves could come from Amadeus basin in southern Northern Territory or offshore Petrel or Tern fields in the Bonaparte basin off Northern Territory.

In late May, Cooper basin unit producers in South Australia agreed with Pipelines Authority of South Australia to sell 10-25 bcf/year of gas during the next 4 years, Sales this year under the agreement are prorated. Other provisions allow termination of the pact in less than 4 years.

J.W. McArdle, Santos executive general manager of commercial operations, said the new agreement restores to Cooper basin producers the market share lost since 1990 because of South Australia's purchase of interstate electrical power.

The new agreement does not change existing contracts providing for gas sales of 95 bfc/year. That volume from 1994 onward is to be split, with 65 bcf/year going to South Australia and 36 bcf/year to Queensland.

Cooper basin gas sales to South Australia in 1991 declined to contractual take or pay levels because power sharing between Electricity Trust of South Australia (ETSA) and utilities in New South Wales and Victoria reduced ETSA's gas demand.

Cooper basin gas recently has been selling at a rate of about 76 bcf/year.

Lacking a new sales agreement, no significant increase of Cooper basin gas sales was likely. But with the new agreement in place, Cooper basin gas sales in 1992 are expected to slightly surpass take or pay levels, he said.

NEW GAS MARKETS

An opportunity to sell gas into new markets could emerge by early 1993, when the government of Queensland decides whether to fund construction of a gas pipeline connecting fields in Southwest Queensland with customers in the eastern part of the state.

Santos and officials of the Queensland government have been discussing the possibility of building a power station in Southeast Queensland to be fired by western Queensland gas. The gas fired power station would be an alternative to a hydroelectric power station proposed for Queensland's Tully-Millstream region. Possible sales to the gas fired station are estimated at 15-25 bcf/year.

Laying the pipeline needed to move gas across Queensland to the Tully-Millstream power station would provide the infrastructure required to reach other markets in the eastern part of the state. Wallis said Queensland officials are expected to make a decision within the next year.