Regional LNG: Petronas to acquire 40% interest in Gladstone LNG project

Australian oil firm Santos announced on Thursday it has selected Malaysian oil firm PETRONAS to be its 40% partner in the development, operation and marketing of the company?s proposed Gladstone LNG (GLNGTM) project in Australia.

PETRONAS will make an initial cash investment of US$2.008 billion, plus a further payment of US$500 million upon reaching a Final Investment Decision for a second LNG train, the company said.

The GLNGTM agreement with PETRONAS establishes a new benchmark for the value of eastern Australian gas resources and represents a major step towards realisation of Santos? Coal Seam Gas (CSG) to LNG strategy. The transaction sells a third of Santos? CSG proven plus probable (2P) reserves and less than 11% of Santos? total 2P oil and gas reserves.

Santos and PETRONAS will form a 60/40 joint venture company to develop and operate the 450 km gas pipeline to Gladstone; develop and operate the LNG liquefaction plant on Curtis Island at Gladstone with initial capacity of 3 mtpa and undertake all marketing activity, accessing PETRONAS? well-established customer base in the three largest Asian LNG markets of Japan, Korea and Taiwan.

The project is on track to enter FEED in late 2008 and reach FID by the end of 2009/early 2010 with first LNG expected in 2014, Santos said. (alex)