Santos eyes stake in $3.5bn PNG pipeline July 3, 2005 - 6:59PM
Oil and gas producer Santos Ltd is in talks to purchase a stake in a proposed $3.5 billion pipeline to transport gas from Papua New Guinea (PNG) to Australia's east coast.
News of the talks comes just days after Santos acquired the Fairview coal seam methane field in Queensland for $A612 million.
Santos managing director John Ellice-Flint said he was "currently in discussions" about getting involved in the PNG pipeline.
"I've always said eastern Australia will need a major new source of gas but in the interim the best way to produce energy is from coal seam methane," he told AAP.
"Our assessment is in the medium and longer term the eastern Australian gas market will require the existing coal seam methane as well as a major new source of gas and PNG appears to be positioning itself for that."
Oil Search Ltd managing director Peter Botten told the ABC's Inside Business program that he would like to get Santos involved in the project in the near-term.
The proposed pipeline would transport gas from PNG's rugged southern highlands to the energy-hungry markets on the east coast of Australia.
Port Moresby-based Oil Search holds a 54.2 per cent stake in the project, while global oil producer ExxonMobil has a 39.4 per cent interest.
Santos snapped up the Fairview field through the acquisition of US-based Tipperary Corporation.
Fairview will boost Santos's overall production by approximately 12 petajoules (PJ), or two million barrels, in 2006.
Further incremental increases are expected in the following years.
The acquisition also gives Santos an extra 4,000 square kilometres of additional exploration acreage.
The transaction is subject to approval by Tipperary shareholders, which is expected in the fourth quarter.
Santos will fund the acquisition with cash.
The company's shares last traded at $11.04.
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