gorgon project, page-4

Thanks Bungy I thought it might have an effect - was wondering if in all this IO angst if anyone still had some time for what UMC has up its sleeve in the Kimberley. Just reinforcing how good UMC's prospects remain...


This may also be of interest - the China/Pilbara IO bit, not the gas price bit

By CLANCY YEATES
SYDNEY

SANTOS and its US partner, Apache Energy, are reigniting
the Reindeer gas project off Western Australia, in a sign the state's thirst for the fuel is strong despite the mining downturn.

The oil and gas company yesterday said it would sell gas
for $US585 million ($A809 million) to the $5 billion Sino Iron project being commissioned by China's Citic Pacific. Santos and 55 per cent partner Apache plan to supply the mine in the Pilbara with 75 petajoules of gas for
seven years from 2011.
Reindeer was deferred last month because of Citic's
worsening outlook, which suggested a voracious demand for
gas was waning as the mining boom came off the boil.
But yesterday's implied price of $US7.80 a gigajoule was
strong by already high WA standards, despite mines having
cut production and energy use.
The deal suggests gas prices will stay high, after the Varanus Island gas explosion in June cut up to 30per cent of WA's gas supply. The shortage sent spot market gas prices as high as $30 a gigajoule, forced heavy energy
users to cut production, and has prompted a joint government inquiry.
In another sign gas prices could have further to rise, the
contract is linked to the oil price after 2014, from when the deal's price assumes oil will fetch $US50 a barrel.
Domestic gas contracts are normally signed at a fixed price
independent of prices for oil and exportable liquefied natural gas, which are higher because of soaring Asian demand.
An analyst at JPMorgan, Mark Greenwood, said it
seemed Santos had been ``playing hardball'' in negotia
tions with Citic. ``It's a very strong price; it's about a 2per cent discount to oil price parity at $US50 a barrel, so it seems to be an LNG-style contract for a domestic contract,'' he said.

The agreement will use about a third of Reindeer's resources and the partners plan to sell the remaining gas domestically. ``All the additional gas they sell will be cream on top,'' Mr Greenwood said.
Santos shares rose 7 to $15.21.


Good luck to all and DYOR