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REUTERS
Brisbane, Apr 22: Australian oil and gas group Santos Ltd said on Wednesday the proposed A$5.5 billion project to transport natural gas from Papua New Guinea to Queensland still faced hurdles. Santos managing director Ross Adler said that resource companies faced huge costs in developing projects such as the PNG-Australia pipeline that needed to be recognised by customers.
"If you want resource projects to get off the ground, people have to be prepared to pay a fair price for it (gas)," he said. "You can't beat resource companies up on day one. Oil Search Ltd , a 27.5 per cent shareholder in the Hides gas field in PNG, last week announced it had signed an agreement with field operator Exxon Corp to ensure adequate reserves were available to underpin the pipeline project.
But the Chevron Corp-led project still hinges on securing customers, with key demand contracts being sought from aluminium group Comalco Ltd and various power generation projects. Comalco is yet to decide if it will locate an aluminarefinery in Gladstone in Queensland or Sarawak, Malaysia.
"You pick up the newspaper and there are customers complaining about price, threatening to go offshore and all those machinations and that is pretty standard fare," Adler said.
"At the other end, there are multi-millions of dollars being spent to move equipment, you've got people working in the wet highlands hundreds of kilometres from the coast and they've got to build pipelines." Adler said, adding "there is a little bit of hysteria" about the project at the moment. "It will add value, it makes sense for the customers and I think there ought to be an ability to let that project go ahead," he said.
Santos signalled its interest in the PNG project when it bought 25 per cent of the giant Hides gas field from Oil Search for $55 million on February 1 this year.
The deal also included a contingency payment of $25-$35 million subject to the PNG to Queensland gas pipeline project proceeding. "We have bought into that PNG project and we aresupporting the project," Adler said. "We expect it will add value to our company but it is difficult."
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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