Australia's Santos sees strong gas demand, targets 85-15 long term-spot ratio

Australia's Santos is upbeat about the global demand for gas over the long term and is aiming for an 85-15 long term-spot contract mix in its gas portfolio amid growing consumption of the fuel, Managing Director and CEO Kevin Gallagher said May 22 at an industry event.

"We're currently around 75-25 long term-spot and so over the longer term, I'd like to move that to 85% long-term contracts. So, 15% spot, but we just have to monitor that and manage that as things go," he said on the sidelines of the Australian Energy Producers conference in Perth.

In all scenarios in the long term, the demand for gas is strong and will continue to grow, Gallagher said.

Gas markets will always continue to respond to various factors -- international shocks, new projects coming online and the economic impacts on the demand-supply curves -- which will move it up and down, he said.

"Ultimately, we think the market is good over the longer term," he said, adding that the company's focus would be on developing its projects and bringing them to the market to expand the company's customer base.

Santos has a portfolio of LNG assets including Barossa, East Coast LNG, and PNG LNG.

However, the company's plans for the Narabbri gas project hit a roadblock in March when an appeal by the traditional owners was upheld by the federal court. The project will cater to the domestic market and could supply up to 50 % of New South Wales's natural gas requirements, according to Santos.

Gallagher said Santos had not given a final investment decision timeline for the project and the company continues to progress with the approval process.

Santos is also developing the Moomba carbon capture and storage phase 1 project, which is now 85% complete and has a first injection timing estimate of mid-2024, according to a company presentation in May.

A large part of the future energy mix will comprise abated oil and gas, Gallagher said during a panel discussion at the event.

While it is desirable to maximize renewables and lower emissions technology, the focus should be on decarbonization and the goal should be to get to net zero rather than how to get to net zero, he said, adding that it should also be technology agnostic to encourage the lowest possible cost for their supply and use.

According to the company's May presentation, its 2024 production guidance was at 84 million-90 million barrels of oil equivalent, while its unit production costs guidance was at $7.45-$7.95/boe.