Santos to help at home

SANTOS will have to make more gas available to local users in order to stave off government export restrictions, energy analysts believe.

The oil and gas producer yesterday said it would divert 30 petajoules of gas from its $24 billion Gladstone liquefied natural gas export project in Queensland to the east coast market in 2018 and 2019.

It is the most significant action taken by Santos and its project partners and comes ahead of the Federal Government deciding whether to declare 2018 a “shortfall” year for gas.

If the government decides east coast gas users are facing a supply crunch, it can impose export restrictions.

The volume to be diverted by Santos represents about 2 per cent of the 700 petajoules the east coast uses annually.

Santos said it was enough gas to power 33,000 homes for two years.

The Adelaide-based producer is viewed as the most vulnerable to export restrictions among the three export

projects that have been built in Queensland and are set to make Australia the world’s biggest LNG exporter.

Energy consultancy EnergyQuest said while Santos’s latest actions would help ease high gas prices, it still expected the government to trigger export restrictions.

“Every little bit helps,” chief executive Graeme Bethune said. “Santos clearly feels under pressure. It’s going to be a tricky issue for the government and the regulators but my guess is they will trigger something. They would rather err on the side of too much gas rather than not enough.”

Santos had already announced various measures to lower gas prices in southern states, including a swap deal with Shell that reduces transport pipeline costs.

Grattan Institute energy program director Tony Wood said the latest move by Santos was significant and would help ease a tight gas market.

But he still expected the energy market regulator to declare 2018 a shortfall year – an announcement that would spur further action from producers such as Santos to fend off government restrictions.

Australian Industry Group chief Innes Willox welcomed the Santos decision but called on the Government to maintain pressure on producers by triggering export restrictions.

“At a minimum that ensures that gas tipped in by Santos can’t be re-exported by another player,” Mr Willox said.

Santos operates the Gladstone LNG project with Malaysia’s Petronas, French group Total and Korea’s Kogas. “We have the capacity to leverage our various assets and partnerships to ensure this energy security,” Santos chief Kevin Gallagher said.

Shares in Santos closed flat at $3.90.