Doubts raised over Santos CSG well capacity to feed GLNG plant

Speculation is mounting that Santos does not have enough gas to feed its GLNG facility on Curtis Island, with analysts stating the company may need to buy as much as 35 per cent of its gas.

According to an investor note by Credit Suisse, the Santos-led GLNG project is short on gas and may need to purchase as much as a third from third-party suppliers.

The agency also said the project is facing a cost blowout of $US3 billion, or 5 per cent, with the total cost set to amount to $US22 billion, The Australian reported.

However Santos has said the project remains on-time and on-budget, with CEO David Knox stating the company had always planned to secure third-party gas deals. Although just how much has not been confirmed.

Credit Suisse analyst Mark Samter said huge uncertainty remained around Santos’ third-party gas needs, which led to the bank reducing the company’s target price.

Speculation that the operations’ CSG wells are not performing well started late last year when a former executive for one of the projects told The Australian that the gas fields’ "sweet spots" had not been as large as anticipated.

It was also reported that a number of dry wells had been an issue.

However, the claims were quickly rubbished by the three proponents running the LNG projects at Gladstone.

A Santos spokesman said drilling activity for the Santos Gladstone LNG project was on track and delivering consistent results.

"We have a good understanding of the geology and there are no surprises," he said.

The $16 Santos-led GLNG project is aiming to produce first gas in 2015.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.