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Santos seeks long-term LNG strategy

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LNG Industry,

Santos recently held its annual general meeting in Adelaide, Australia. The Chairman of the company, Peter Coates, commenced the meeting, stating: “I accept that when the key LNG investment decisions were made, like most in the industry, we did not fully anticipate the timing, speed or depth of the current down cycle for oil prices. […] But Santos is a long-term business.”

Coates went on to say that: “Over the past five years, our multi-billion dollar investments in Papua New Guinea and Gladstone were made with this in mind. While they required us to increase our debt level in the short-term, they are by no means short-term projects. […] Any final judgement on the success of our LNG strategy should be measured through the oil price cycle, rather than today’s spot price.

“Our confidence in the long-term demand for energy remains strong. As does our belief that Santos is well positioned to benefit from this growing demand. […] We have already implemented significant initiatives to drive costs out, improve productivity and ultimately, produce more for less.”

Kevin Gallagher, the CEO of Santos, reiterated the disappointing financial results from 2015 due to the low oil price, although he did note the solid production and operating performance from that year. Gallagher also noted that: “In 2015, Santos recorded its best safety performance on record with a lost time injury frequency rate of 0.1 incidents per million hours worked.”

Gallagher also discussed the recent changes to the executive team and a new organisational structure, claiming that this signified “a move away from geographic business units to create a single business: one Santos. […] This means an asset-based management structure with strong technical capabilities in exploration, development and production.

“The review of our operating assets is ongoing and the transition to the new structure will be completed over the next few months.”

Although sustainability and long-term focus were topics at the meeting, Gallagher still highlighted the near-term strategy, naming the following as key near-term aims:

  • Stabilisation of the business.
  • Decrease the debt.
  • Put the correct framework in place to allow the business to be low cost, reliable and operate at a high performance.

Gallagher added: “Natural gas is the only fuel that can deliver reliable, cleaner and affordable energy to the world’s major developing economies, including China. […] Over the next twelve months my priority is to strengthen our capabilities in exploration, development and production to lift our operational performance.

“We will also strengthen our commercial and business development capabilities to maximise returns. […] It is essential that Santos rebuilds its exploration capability to find new reserves to provide future growth. […] This includes an assessment of targets in the Northern Territory and Queensland, and nearfield exploration to deliver additional gas.”

Edited from various sources by David Rowlands

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