$6m gas deal claimed [02feb06]

SANTOS has committed to buying into AGL's $6 billion gas pipeline project according to Papua New Guinea's Energy Minister, but Santos is remaining tightlipped.

At a reception for Townsville's civic leaders in Port Moresby on Friday, PNG Deputy Prime Minister and Energy Minister, Sir Moi Avei, said Santos's involvement was a done deal.
Speaking to the Herald Sun, Sir Moi confirmed Australia's third largest oil and gas company had committed to the project.

"I know we have finalised a deal with Santos, which is now subject to endorsement by their board," Sir Moi said.

"When you put together the other customers, AGL, QAL, Comalco, CS Energy, and Alcan we have gone past the threshold volumes that the project needs."









Santos spokeswoman Kathryn Mitchell was sticking to the script yesterday, saying while the company had made no secret it was in talks with the participants about Santos's potential role, any announcement would be made through the stock exchange.

Shaw Stockbroking resources analyst John Colnan said the pipeline was just one of a number of issues Santos was working through.

"Santos is currently in negotiations with AGL re gas pricing," Mr Colnan said.

"Santos is seeking higher prices and AGL is seeking to pay a lower price for gas coming out of the Cooper Basin.

"If Santos jumps into the PNG project right now . . . then what they're attempting to do with one hand they might be cutting off with the other.

"I believe Santos want to resolve a number of issues before attempting to unlock the PNG gas."

Mr Colnan said he believed Santos would at least wait until the true capital cost of the project was released towards the end of April, before committing.

AGL last month brought forward its $543 million investment in the pipeline project by six months.

The project, which would include a 3000km pipeline from the PNG highlands to Australia, is likely to ge given the go-ahead later this year, with Townsville the likely beachhead for the Australian end of the pipeline.

Also yesterday, the Santos-operated Casino gas field began production, two months ahead of schedule. The field, off the Victorian coast, has delivered its first gas.

It is the second large Santos project to come online ahead of schedule within nine months, following the Mutineer-Exeter oil field starting production in April last year, three months ahead of schedule.

Santos shares yesterday finished at a record closing high of $13.47, up 37c.