Santos has announced a $US1.5 billion writedown on the value of its GLNG project, saying low oil and gas prices are continuing to challenge the industry.
The GLNG project draws coal seam gas from fields in the Surat and Bowen basins and converts it to LNG at a plant on Curtis Island, Gladstone – which celebrated its first exports in October last year.
In a statement to the market this morning, Santos said the GLNG non-cash write-down followed a review of its key production assets.
It advised that it expected to recognise an impairment charge against the carrying value for GLNG of about $US1.5 billion before tax in its 2016 half-year accounts.
Santos chairman Peter Coates said: “The expected impairment charge for GLNG is clearly disappointing but it is a consequence of the challenging environment which we now face. We have decided to adjust our long-term operating assumptions for GLNG to reflect the reality of the current oil price environment.
“However, we firmly believe in the strong long-term growth of LNG consumption and demand globally. GLNG will continue to be an important part of our LNG portfolio and a key supplier of LNG to the Asian market.”
Santos is the operator and has a 30 per cent interest in the GLNG project. Co-venturers include PETRONAS of Malaysia (27.5 per cent), Total of France (27.5 per cent) and KOGAS of South Korea (15 per cent).
Santos managing director and chief executive officer Kevin Gallagher said GLNG was seeing the effects of ongoing constraints on capital expenditure and a softer LNG market
“We are experiencing a slower ramp up in production of GLNG equity gas and the price of third party gas has increased,” Mr Kevin Gallagher said.
“We have therefore adjusted our assumptions regarding upstream gas supply and third party gas pricing. This will not affect GLNG’s ability to meet its LNG off-take commitments.
“We will continue to maintain a disciplined approach to capital allocation, reducing costs and seek opportunities to optimise our asset portfolio in a manner that delivers value to shareholders.”