Santos: We can double production

SANTOS managing director Kevin Gallagher says the oil and gas heavyweight could almost double production to more than 100 million barrels a day by 2025.

In a presentation to analysts yesterday, Mr Gallagher said the company could hit the milestone as it expands oil production following its buyout of Quadrant Energy, and if it wins approval for the “very lucrative” $3.6 billion Narrabri coal seam gas project in New South Wales.

Mr Gallagher said the $3 billion takeover last month of Western Australia’s Quadrant Energy would underpin a lift in production to 100 million barrels of oil equivalent every day.

That is nearly double Santos’s 2017 output and compares with the 79 million barrels of combined output from Santos and Quadrant now.

The ambitious goal would position the energy company as a bigger force in the industry, with volumes staying within reach of those of bigger independent producers in the region including Woodside Petroleum.

In slides presented yesterday, Narrabri, in the Gunnedah Basin, was absent from the growth plans.

“The recently announced acquisition of Quadrant Energy will further reduce our break-even oil price and deliver operatorship of a high quality portfolio of low-cost, long-life conventional West Australian natural gas assets,”

Mr Gallagher said. “We are now positioned for disciplined growth leveraging existing infrastructure in all five of our assets in the portfolio and are targeting production of more than 100 (million barrels a day) by 2025.”

Most of the new production is seen as coming from Quadrant’s Dorado oil discovery in Western Australia’s Bedout Basin.

Mr Gallagher told the briefing the 100-million-barrel target did not preclude other options such as Narrabri, the onshore McArthur Basin in the Northern Territory, the Petrel-Tern-Frigate project off Darwin and the greater Bedout Basin.

Dorado is forecast to produce 50,000 barrels of oil a day.

Narrabri, where 2022 production has been previously targeted, was not named yesterday as one of the projects the group is looking to for growth.

But Mr Gallagher later said that was because it was still going through a lengthy approval process.

“Narrabri is still very important to us,” he said.

“With current east coast pricing … it looks like a very, very lucrative project.”

Last year, Santos returned the project to “core asset status”.

Since taking over as chief executive in early 2016, Mr Gallagher has sold off a string of assets to cut debt and tie Santos’s future to the Gladstone liquefied natural gas operation in Queensland, the Papua New Guinea LNG operation and other LNG projects.

These include assets in the Cooper Basin straddling South Australia and Queensland.

Mr Gallagher said Santos now had Australia’s lowestcost onshore operations and a strong balance sheet to support its growth ambitions.

The company produced 59.5 million barrels last year, most of that linked to oil output.

Woodside is aiming to produce between 87 million and 91 million barrels this year, mainly from its LNG operations in Western Australia, where it is positioning itself to expand capacity and use its export plants as hubs for undeveloped gas fields.

Santos shares closed down 1 per cent at $7.25.