Australia’s third-biggest oil producer will commence sales from the country’s first commercial shale oil project in October.
Santos Ltd. (ASX: STO) commented on the success of its drilling operations, and the news sent the company’s stock skyrocketing to its highest level in over two months.
The first sales will draw on production from the Moomba-191 well in the Cooper Basin region. Santos is also continuing development on the $18.5 billion Gladstone liquefied natural gas project (GLNG), which is one of three such developments in Queensland intended to respond to rising demand from Asia. Australia has around 400 trillion cubic feet of shale resources, according to government estimates.
“The Moomba well is an exciting result,” Philipp Kin, a Sydney-based analyst at Royal Bank of Scotland Group Plc, said in a phone interview. Further development of its shale gas resources could “put to bed a few of the questions remaining about whether they have enough gas for GLNG,” he said.
Santos shares rose to A$11.78, or 3.2 percent, on Friday.
The company also stated that gas is currently flowing at around 2.6 million standard cubic feet per day at Moomba, and that the first horizontal shale gas well is expected to be drilled early next year. The well will be situated in the outback region between Queensland and South Australia.
Santos reported a decline in income from A$504 million in 2011 to A$262 million as of the end of June this year. However, the company’s earnings in 2011 benefited from A$246 million in asset sales, a one-time bump, Bloomberg says. The company also reiterated its annual production expectation of 51 to 55 million barrels of oil equivalent.
This June, Santos ramped up its capital spending estimates for the Gladstone project by around 16 percent. This was necessitated by the company’s plans to drill an extra 300 wells. The Gladstone project has Santos working alongside Total SA (NYSE: TOT), Petroliam Nasional Bhd., and Korea Gas Corp (KRX: 036460).
In the year ending June 2013, Santos anticipates costs between A$45 million to A$65 million on carbon emissions, since the Australian government has, since July, been charging polluters A$23 per metric ton for emissions.