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Santos Focus On Moomba, Timor Sea

Australian Financial Review, January 29, 2004
by Ian Howarth

Santos management hopes new production from the Bayu Undan field in the Timor Sea will provide a much-needed lift to its production rate following a 5 per cent drop in production during 2003.

The Adelaide-based oil and gas group said plans for the full resumption of natural gas liquids production at its Moomba gas plant were expected to be completed in early February, with full-scale gas production capacity of about 650 terajoules a day targeted for the second half of April.

Santos said yesterday total 2003 production was 54.2 million barrels of oil equivalent compared with 57.3 million BOE in 2002. December-quarter production was 13 million BOE compared with 14.4 million BOE in the December 2002 quarter.

Sales revenue for the year was also slightly lower at $1.46 billion, down from $1.47 billion a year earlier.

Chief executive John Ellice-Flint said the yearly revenue figure had remained virtually steady despite the rapid strengthening of the Australian dollar, which reflected higher average prices across most products.

But Santos is facing a big drop in revenue in the present quarter following the shutdown of the Moomba gas plant due to a fire on New Year's Day.

"Santos has been working, via a staged process, to bring supply of gas back to levels normal for this time of year," Mr Ellice-Flint said.

He said the plant was now supplying 200 terajoules of gas a day but the company was aiming for 450 terajoules in the second half of February.

Mr Ellice-Flint said repairs to the plant, allowing full-scale production rates of 650 terajoules a day, were due for completion during the second half of April.

"The short-term issue for Santos is the Moomba incident," Morgan Stanley analyst Stuart Baker said.

"They have to demonstrate they can get it back on line as per their guidance.

"The driver then will be the success of their exploration program.

"Santos has to tough out 2004 and hope for a strong [earnings] recovery in 2005."

Mr Ellice-Flint said wildcat drilling on the group's deep-water oil exploration program off the south coast of Victoria was likely to start in the second half of this year.

Despite the lower gas sales volumes, Santos posted record annual gas and ethane sales revenue of $720.8 million, up 9.3 per cent on the previous year.

Much of that was driven by high gas prices in the US, where a gas shortage has driven spot prices to well over $US5 a unit during the year.

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