Another little tidbit here from Thomson Reuters (apologies if already posted, haven't been following this much since the AGM was unremarkable in terms of new information)
By Rebekah Kebede PERTH, Dec 4 (Reuters) – Santos Ltd , Australia's No. 2 energy company, could face more than $1 billion in additional costs to drill enough wells to bring its $18.5 billion Gladstone liquefied natural gas (LNG) export plant up to full capacity.
The project is part of a $190 billion surge in new LNG capacity development under way in Australia, but costs have already blown out by around 16 percent from an original estimate of $16 billion. [ID:nL4N0GT2NM] Santos told an investor briefing on Wednesday it would have to drill about 300 wells in two years to 2015, and another 200 to 300 wells a year thereafter to source enough coal seam gas to fuel the plant, which is due to come on stream in 2015.
While well costs have fallen in the past three years, if drilling costs remain the same, the drilling programme would lead to additional capital expenditure for Gladstone of $1.2 to $1.6 billion through 2018, according to Reuters calculations.
"While the $18.5 billion number hasn't changed ... we're going to have 200 to 300 wells with ongoing costs probably being in the order of $400 to $500 million a year," said Johan Hedstrom, an analyst with Canaccord Genuity Australia in Sydney.
This would be in sharp contrast with offshore projects such as the North West Shelf in Western Australia which had ongoing capital costs of about $10 to $20 million a year, Hedstrom said.
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I reckon all the projects are in a spot of bother and that places us in the box seat IF we can demonstrate an ability to lift production. It was disappointing I feel not to get more information about the forward program from the AGM. STO would be loath to tell the markets they are running over budget again and therefore a GSA for 30 or 60 tj/d at no up front cost works wonders for them.
WCL Price at posting:
18.5¢ Sentiment: Buy Disclosure: Held
