Santos writes down value of stake in Gladstone project

SANTOS has written down the value of its stake in the Gladstone LNG project by $US870 million ($A1.1 billion) after tax, adding to a $565 million writedown in December.

It follows Origin Energy’s decision last week to slash $1.2 billion from the value of its Australia Pacific LNG project, also in Gladstone.

The biggest impact on the Santos decision was to lower its expectations on the oil price, which led to a companywide writedown of $US690 million to be reflected in its half-yearly results later this month.

But the huge flow of gas to the Queensland LNG projects may have slowed, according to a report from industry analysts EnergyQuest. It said Queensland gas imports from other states had slowed considerably. Net easterly flows along the South West Queensland Pipeline peaked at 335 terajoules a day in early January but gas has flowed westward since June at an increased rate averaging 85 terajoules a day in July.

Gas production from the upstream LNG gas processing plants averaged 3631 terajoules a day in July, up from 3570 terajoules a day in June. Higher production appears to reflect higher domestic demand.

Santos said a lower US dollar oil price assumption also impacted the Cooper Basin assets, but this was more than offset by a continuation of the cost efficiencies and performance improvements achieved during 2016 allowing increased drilling activity and production. “This has resulted in an expected positive net writeback to the Cooper Basin, carrying value of approximately $US330 million (A$421 million) after tax,” Santos said.

Santos also expects to take an impairment charge against the non-core AAL asset in Indonesia of about $US150 million (A$191million) after tax following an assessment of the impact of lower oil prices.

The trouble for the LNG companies comes despite booming export volumes.

EnergyQuest said the July Australian LNG shipments jumped to a record 5.4 million tonnes, up from 4.9mt in June as the Gorgon and North West Shelf output increased.

West coast projects shipped 3.7mt in July, and Queensland projects (including GLNG) shipped 1.7mt — as in June.