Santos has announced a write-down of US$1.5 billion on its GLNG asset.
The resources company blamed ongoing low oil prices, which impacted GLNG returns and constrained overall capital expenditure.
“During the course of 2016 there has been a slower ramp up of GLNG equity gas production and an increase in the price of third party gas,” the company said in an official statement
“This has caused Santos to adjust its upstream gas supply and third party gas pricing assumptions for GLNG.”
According to Santos, the company expected the impairment due to the current market weakness, with managing director Kevin Gallagher stating, “Low oil and gas prices continue to challenge our upstream business and the entire oil and gas industry.”
“At GLNG we are seeing the effects of ongoing constraints on capital expenditure and a softer LNG market,” he said.
“We are experiencing a slower ramp up in production of GLNG equity gas and the price of third party gas has increased”
Santos chairman Peter Coates voiced his disappointment in the write-down, but remained positive on GLNG’s future.
“The expected impairment charge for GLNG is clearly disappointing but it is a consequence of the challenging environment which we now face,” he said.
“We have decided to adjust our long-term operating assumptions for GLNG to reflect the reality of the current oil price environment.
“However, we firmly believe in the strong long-term growth of LNG consumption and demand globally. GLNG will continue to be an important part of our LNG portfolio and a key supplier of LNG to the Asian market.”