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Santos sells stake in Gladstone LNG and signs supply agreement with KOGAS

LNG Industry,

Santos Limited today executed binding agreements with KOGAS and Total, which pave the way for a final investment decision (FID) in January 2011 on the two train GLNG project. The company has also entered into binding supply agreement with KOGAS, and plans to raise AU$ 500 million to fund its share of the projects cost.

Equity sale

Santos has today also entered into separate agreements for the sale of 7.5% interests in GLNG to each of KOGAS and Total, for aggregate proceeds of AU$ 665 million. In parallel, Petronas has also entered into an agreement to sell a 7.5% interest in GLNG to KOGAS. Upon completion of the sale transactions, the ownership structure of GLNG will be: Santos 30%, Petronas 27.5%, Total 27.5%, and KOGAS 15%.

Equity raising to fully fund GLNG

Santos today also announced a fully underwritten institutional placement to raise approximately AU$ 500 million to complete the funding of its 30% equity contribution for the two train GLNG project. Santos will issue approximately 39.8 million ordinary shares at a placement price of AU$ 12.55 per placement share to raise the equity.

KOGAS supply agreement

GLNG has today signed a binding heads of agreement for the sale of 3.5 million tpa of LNG to KOGAS, the world’s largest buyer of LNG.

In conjunction with the agreement with KOGAS, 1.8 million tpa of Petronas’ 3.5 million tpa of committed offtake will be delivered from GLNG train 1 and 1.7 million tpa from train 2. The Petronas agreement will also remain in place for a 20 year term.

In combination, the KOGAS and Petronas binding agreements now provide for the sale by GLNG of 7 million tpa of LNG in aggregate for 20 years, underpinning the development of a two train project.

Santos Chief Executive Officer David Knox stated, “Notably this agreement represents the first purchase of LNG from coal seam gas by KOGAS. It is another robust endorsement of the quality of the GLNG project. We look forward to continuing to develop our relationship with KOGAS both in its capacity as a customer of, and a partner in, GLNG.”

A previously announced take-off agreement with Total for 1.5 million tpa is effectively cancelled out by this new supply agreement, as per the terms of the agreement with Total.

First LNG exports are expected to commence in 2015, generating about US$ 6 billion in average gross revenue per annum at a market consensus oil price for the 7 million tpa off-take.

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