santos article in the age

Woodside in hunt for Santos?
BARRY FITZGERALD
March 25, 2010

WOODSIDE is rumoured to be contemplating a $15 billion bid for Santos to get its gas export interests, most notably in the budding Queensland gas export industry.

A bid for Santos would deliver Woodside exposure to the Queensland gas projects based on coalbed methane (CBM) resources, as well as Santos' interests in the ''conventional'' and existing Darwin liquefied natural gas project, and the committed $US15 billion PNG LNG project.

Any move on Santos would be a major about-face for Woodside, with its managing director Don Voelte not a recognised fan of the CBM-based LNG export projects.

Santos' share price has risen strongly in the past three weeks on the rumours, which had as their origin talk that Woodside has been sounding out industry personnel about their willingness to join a team for an unnamed major venture, now said to be a move on Santos.

But the 9.7 per cent gain in Santos' share price in the past three weeks is not all that unusual compared with its industry peers.

Woodside itself has put on 7 per cent in the same period.

Analysts described the rumours as chatter and pointed out that Woodside has its own super-charged LNG growth plans to pursue without having to bother with the unknowns of LNG gas exports from CBM resources. And Britain's BG has previously been suggested as a bidder for Santos.

The theory doing the rounds of trading rooms was that Woodside would sell off all Santos' non-export gas interests to defray the cost of the acquisition, one that could see the Santos LNG project in Queensland combined in a partnership with the Queensland LNG ambitions of Woodside's biggest shareholder, Shell.

A bid for Santos has been on the cards since the South Australian government lifted the 15 per cent shareholding restrictions in the company - a throwback to the days when Alan Bond was stalking it.

BG Group has jumped to the lead in the race to become the first Queensland gas exporter after formally signing a May 2009 deal for the supply of $50 billion of gas to China. The deal followed up the agreement with China National Offshore Oil Corporation for sales from BG's proposed Curtis LNG project near Gladstone in Queensland.

The agreement covers the supply of 3.6 million tonnes of LNG annually over 20 years. The value was not disclosed and is highly dependent on oil price assumptions. A range of $40 billion to $60 billion is the expectation .

It is one of the biggest LNG contracts written and is the world's first fully termed sales and purchase agreement for the supply of LNG from coal seam methane, as distinct from a simple understanding to buy LNG on terms and conditions yet to be decided.