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Santos strikes coal seam gas deal with AGL Energy

Business

Adelaide-based oil and gas giant Santos has expanded its portfolio after striking a deal with AGL Energy to receive coal seam gas for its GLNG project.

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Santos announced the partnership with AGL to the ASX for the purchase of 254 petajoules of coal seam gas from the Wallumbilla fields in Queensland fields over 11 years, starting January 2017.

Santos has a 30 per cent stake in the GLNG project which produces natural gas from coal seams in the Surat and Bowen basins, near Gladstone, Queensland which is then converted into liquefied natural gas.

GLNG vice-president downstream Rod Duke said the agreement with AGL added to its diverse gas supply portfolio, which included gas sourced from its own coal seam gas fields, underground storage and third-party supply.

“When combined with GLNG’s quality LNG off-take contracts with project partners PETRONAS and KOGAS, this supply portfolio delivers significant value to the project,” he said.

“Since our first LNG cargo in October, ramp-up of LNG train 1 has progressed well, with the train having already produced well above nameplate capacity. Six LNG cargoes have already been shipped to our customers.

“Commissioning work on GLNG’s second LNG train has commenced with a number of its subsystems now operational, and we are on track for first LNG from train 2 in the second quarter of 2016.”

It’s been a year of mixed fortunes for Santos, which has seen the embattled resources producer announce a new CEO, cut hundreds of jobs amid fluctuating share prices, resist a $7 billion takeover and release shares as part of a $3.5b rescue plan to claw back its losses.

Santos CEO David Knox

Former Santos CEO David Knox

In August CEO David Knox announced he was stepping down. Santos later announced that Clough engineering services chief Kevin Gallagher would take over.

Santos rejected a $6.88-a-share takeover launched by Bermuda-based Scepter Partners.

With a newly minted CEO ready to slide into the fray, it responded to its critics with a $3.5b plan to raise capital to bed down debt.

Part of that debt-recovery package for the “leaner, more agile” Santos, included the axing of 765 workers – 200 from its Adelaide base and 565 from operations around Australia.

Other GLNG participants are PETRONAS (27.5%), Total (27.5%) and KOGAS (15%).

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