Santos, the Australian energy company, has reported lower LNG output and sales revenue for the second quarter. The decline in sales volume is primarily due to the Gladstone LNG (GLNG) project diverting more gas to the domestic market to address a projected shortfall in winter. During April-June, GLNG shipped 22 cargoes, down from 27 in the previous quarter and 25 for the same period last year. Santos expects GLNG production to reach around 6 million tonnes for the full year.
However, Santos’ domestic gas sales saw a slight increase, rising by $6 million to $270 million in April-June. The ExxonMobil-operated Papua New Guinea (PNG) LNG project also experienced a decline in sales volumes, falling by 3.3% on the quarter and 2.1% on the year to 2.1 million tonnes. Despite this, the project shipped a consistent 28 cargoes for April-June.
Meanwhile, output from the Darwin LNG (DLNG) project continued during the quarter, despite dwindling reserves at the Bayu-Undan field. Production is expected to cease in the second half of this year. Drilling operations are currently suspended at the Barossa gas project, which is planned to provide backfill gas for DLNG from 2025. Santos is working to consult local Aboriginal communities regarding the project and comply with Australian upstream regulator orders to investigate cultural heritage sites along the pipeline route.
Santos’ overall LNG sales revenue for April-June was $838 million, a 22% decrease compared to the previous quarter. The company’s total sales revenue for the quarter also fell by almost 30% to $1.34 billion. This decline is attributed to softening LNG prices. The average realised LNG price was lower than the previous quarter, primarily due to sales contracts linked to a lower lagged Japan customs-cleared crude price and lower north Asia spot prices. Out of a total of 53 LNG cargoes, only eight were sold on a spot-linked basis for the quarter.
Looking ahead, Santos has narrowed its production volume guidance to a range of 89 million-93 million barrels of oil equivalent (boe) for 2023. The sales volume guidance remains unchanged at 90 million-100 million boe. These estimates include PNG LNG at a 42.5% working interest, which will be revised once the expected sale of a 5% interest is complete. Santos has extended the acceptance period for a binding conditional offer from PNG state-controlled Kumul Petroleum until 31 August.
Despite the challenges faced by Santos in terms of lower LNG output and sales revenue, the company continues to navigate the evolving market conditions. With ongoing projects and a focus on working with local communities, Santos aims to maintain its position in the energy sector.
