Good news and bad news for Santos yesterday.
The good was "the China card" with media reports in Hong Kong suggesting that a Chinese oil major, China National Petroleum, might round up some partners to bid for Santos now that that South Australian share holding cap has been removed.
The bad news was the failure of the company’s Reindeer gas project off the WA coast with US group, Apache Corp, to attract any interest
That has forced Apache and Santos to defer development of the $900 million project.
Santos told the ASX yesterday that the delay in the Reindeer project will mean the suspension or termination of engineering and construction contracts.
In April, Apache and Santos committed to building the project in Western Australia.
Santos has a 45% interest in the Reindeer Project. The remaining interest is held by Apache Corp (55% and operator).
Both were shareholders in the fields supplying Apache’s Varnaus Island facility that was damaged by an explosion and fire on June 3.
It cut gas supplies to WA for over two months and the effects are still being felt. It helped cut economic growth in the September quarter by cutting exports from WA.
The venture, which included the construction of an onshore processing plant south of Karratha, could have supplied 20% of the WA market.
“The decision was made due to adverse changes in the global economic outlook that have impacted the proposed foundation gas customer,” Santos said in the statement.
Work will continue on regulatory approvals for the project to ensure a “timely” restart once gas sales agreements have been completed, Santos said.
Santos was queried late yesterday about the big price rise after the report about possible Chinese interest.
It said there was nothing but the speculation in the South China Morning Post.
The paper said that China National was looking at Santos. The shares jumped to a high of $14.08 and closed at $13.25, up $1.10, or 9%.
The Morning Post said that China National Petroleum has examined two potential partners for a bid without making any approaches, the newspaper reported, citing a person it didn’t identify.
It said potential partners may include Chevron Corp., BP, Italian group ENI and Total of France.
South Australia removed the 15% limit on individual shareholdings in Santos at the end of last month, 12 months after passing the legislation.
Santos is planning a huge coal seam gas-based LNG venture with Petronas of Malaysia near Gladstone and it has a stake in Exxon and Oil Search’s proposed Papua New Guinea LNG venture.
