occum has touched on a part of the bigger STO picture that I...

occum has touched on a part of the bigger STO picture that I suspect is counter productive to CVN, and I want to probe it further - GAS.

In very short terms, the gas in Dorado is a hindrance to oil production - it costs extra to separate, to manage and to 'dispose of'. It reduces the economic outcome (assuming that flaring is no longer an option). So, the alternatives are to re-inject (maintaining pressure support), or to export (by pipeline etc). Both require pre-planning and up-front capital to either equip the facility for pressured injection, or to build a pipeline to export.

Santos will be looking at this in the longer term and from a corporate point of view. They have a gas facility at Varanus Island that will before long become uneconomic as current gas contracts wind down. In the absence of an alternative supply, if they can tie back Dorado, it provides contract continuity, keeps their facility operational and they toll their partner's gas through the facility. For Santos, while this option may well be less economic as a stand-alone Dorado development, it may be more economic for Santos' corporate gas supply picture.

I have no inside detail on this, but on the face of it I would expect that the most profitable standalone option will be to prioritize Pavo's low-gas oil and optimize oil production from Dorado by re-injecting production gas. I just can't see how the capital to build a 400km undersea pipeline to Varanus to produce & export a very modest volume of gas can be economic. I suspect that it detracts from the project and only works because of the value it adds to Santos further down the supply/contract chain.

I think Santos are spending a lot of time trying to line up all the ducks see if they shoot several with a single shot. That's why it keeps getting dragged out.

And sadly, I don't see what CVN can do about it.

Still an attractive project, but perhaps less so...

....... mutineer