LNG producer Santos extended the life of its Reindeer gas field into the second half of 2024, but the future of its WA portfolio remains clouded in the longer term.
LNG producer Santos extended the life of its Reindeer gas field into the second half of 2024, but the future of its Western Australian portfolio remains clouded in the longer term.
Reindeer, which once contributed close to one-fifth of the state’s domestic gas supply through the Devil Creek gas plant, was slated to cease production last year. However, a well-cycling strategy has extended its life.
But in a sign of Santos’s diminishing WA output, the Devil Creek plant operated at less than 10 per cent of its nameplate throughput capacity in the first half of the year.
Santos reported 20 terajoules of gas per day through Devil Creek in the first six months of 2024, against the nameplate rate of 220TJ/day.
The state’s gas bulletin board shows Devil Creek contributed no gas into the local market between February and mid-April but has since ramped up to a rate of around 35TJ/day.
Santos’s Varanus Island plant, which has a 390TJ/day nameplate capacity, has averaged 207TJ/d of throughput over the first six months of 2024.
Meanwhile, the company progressed decommissioning work at the Mutineer, Exeter, Fletcher and Finucane operations where production ended last decade, and finished decommissioning work at the Harriet 13 well and Campbell offshore platform.
On an investor call this morning, Santos managing director Kevin Gallagher said the company hoped to run its WA business to generate revenue to cover its cost of decommissioning.
“The plan there is absolutely to run that business cash-flow positive and to be tailoring the profile of decommissioning activities so that it’s self-funded, and there’s a bit left over at the end of the day,” he said.
Mr Gallagher said he expected staggered decommissioning capital expenditure in the WA business – which came to $US213 million over the first half of 2024 – to drop in the years ahead.
Santos sold $US435 million worth of LNG from its WA project, up $33 million against the previous corresponding half.
Mr Gallagher was non-committal on the mid-to-long-term future of the WA portfolio within the company’s overall asset book.
“The challenge for WA really is, how does it develop its strategy going forward to fit with the corporate strategy,” he said.
“But today, it is part of our business, and we are very focused on running it efficiently, cash-flow positive, and making sure it gets the best outcome for our shareholders.”
A move to cut 200 jobs earlier this year was described as “right sizing for the future”, and Mr Gallagher said he expected more optimisation in the WA portfolio in the years ahead.
Once depleted, Santos hopes to turn the Reindeer field into a carbon capture and storage operation, supplying third parties with a carbon capture service off the Pilbara coast.
Meanwhile, a final investment decision on the undeveloped 80 per cent owned Dorado project is expected in 2025, having been pushed back again earlier this year.
Overall, Santos reported an underlying profit of $US654 million off sales revenue of $US2.7 billion, with its statutory profit reported at $US636 million for the half; a 19 per cent reduction from the same period a year earlier.
Its Barossa project in the Northern Territory is nearing 80 per cent completion, on track for first gas in the third quarter of 2025.
The company paid an interim dividend of US13 cents per share.
Its share price was 4.7 per cent lower at 11am, trading at $7.45.
