SANTOS says consolidation in the Queensland liquefied natural gas market is now ''unlikely and difficult'', giving its strongest indication that its $8 billion gas project will get the green light later this year.
Speaking after a Melbourne Mining Club lunch, Santos chief executive David Knox said the company was in talks with Asian buyers to supply gas from its first and second LNG production trains from its Gladstone project.
Santos already has a deal to supply 2 million tonnes a year of LNG to its joint venture partner, Petronas, with an option to extend that to 3 million. A final investment decision on the first 3.6 million-tonne-a-year train is expected mid-year if it has federal government environmental approval.
Mr Knox said the potential for gas buyers to purchase an equity stake in the project was a ''unique selling point'' for Santos as it looks to sell down its share from 60 per cent to 51 per cent. But, he warned, if Ken Henry's tax review was to target the oil and gas sector then investment could be affected. Mr Henry's recommendations are expected to hit miners with a 40 per cent tax on the profit margins of operating mines.
''The last thing we want is any uncertainty or change in fiscal environments. That would be, for us, very difficult to manage and could well threaten our investments,'' he said. ''We would not want any of our partners to experience a loss of confidence in the fiscal stability of Australia.''
Mr Knox said another equity raising would depend on factors including whether it can sell the 9 per cent stake in Gladstone LNG.
''We have a very good starting position. We have $2 billion in cash sitting in the bank,'' he said. ''The issue of whether we need to raise equity is one which we will address when we come up to FID and the question of whether we have to do that will depend on things like asset sales and what confidence we have in the oil price.''
Analysts have long predicted that the handful of Queensland LNG hopefuls would fall to two. Mr Knox said Santos was unlikely to be involved in that consolidation as it nears a final investment decision.
''We have been in favour of consolidation; we believe it makes sense,'' he said. ''But I have said that the opportunity for consolidation was really until the end of last year. That has now passed.''
