Subject: AU: Santos ups stake in Bayu Undan

The Australian (Australia)

July 31, 2007 Tuesday

Santos ups stake in Bayu Undan

Nigel Wilson, Energy Writer

SANTOS has emerged as the second largest player in the Bayu Undan gas-stripping and LNG operation after a two-year formal redetermination process.

The decision will provide Santos with additional long-term revenue and reinforces the company's strategy to have more than half its output, and thus its revenue, derived from LNG by the end of next decade.

Under the new arrangements, ConocoPhillips, operator of the Timor Sea development that provides the bulk of East Timor's revenue, will increase its stake marginally.

The new interests include: ConocoPhillips 57.2 per cent (previously 56.27); Santos 11.4 per cent (10.64); INPEX 11.3 per cent (10.52); ENI 11 per cent (12.04); and Tokyo Electric Power Company/Tokyo Gas Company combined 9.2 per cent (10.08).

Santos is the only Australian-listed company in the Bayu Undan joint venture.

The Bayu-Undan field is located in 80m of water about 500km northwest of Darwin. The development is in two parts, with natural gas liquids such as propane, butane and condensates being stripped from the gas at facilities on site, with the dry gas subsequently piped to a 3.5 million tonnes a year LNG plant at Wickham Point in Darwin Harbour.

East Timor takes 90 per cent of government revenues from the project and Bayu Undan is estimated to have provided up to $US1.5 billion ($1.78 billion) for the embryonic nation's petroleum fund.

Santos told the stock exchange yesterday the increased stake would take effect immediately and would be backdated to the beginning of field development activities.

Production of LPG and condensates from the Bayu Undan field began in 2004 while LNG production from the Wickham Point plant in Darwin began early last year.

Santos declined to disclose the benefit of the backdated share with industry sources, suggesting it could be about $US10 million.

The company does not provide a profit breakdown for individual business units.

The benefit to Santos will depend on movements in the crude oil price and its impact on the long-term contracts the Darwin LNG project holds with Tokyo Electric and Tokyo Gas.

Santos officials said the redetermination process had produced a good result for the company and said the outcome was pleasing.

The partners are evaluating exploration results for a number of discoveries in the Timor Sea that may be developed for a proposed $US6-10 billion expansion of Wickham Point, which will more than double its capacity as early as 2012.

The Wickham Point site has production approvals for 10 million tonnes with ConocoPhillips publicly committing to a possible 5-7 million tonnes a year development, based on Timor Sea gas supplies from Woodside's Greater Sunrise development, or the Caldita field, which Santos shares with ConocoPhillips.

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