PERTH (miningweekly.com) – Oil and gas major Santos has inked a natural gas supply contract with alumina producer Alcoa, which the Australian Petroleum Production & Exploration Association (Appea) on Monday said rubbished claims that long-term contracts were hard to secure.

The contract would see Santos supply 82 PJ of gas to Alcoa, over an initial five-year period, starting in 2018, from the John Brookes field in the offshore Carnarvon basin. The contract allowed for two five-year extension options, by mutual agreement.

Santos GM for Western Australia and the Northern Territory Brett Woods said on Monday that the Alcoa agreement was the start of what could potentially be a long and mutually-beneficial partnership.

“This is a significant contract for us, not only in terms of its value, but also in its tie-up with Western Australia’s biggest buyer of natural gas. I am confident it will set the foundation for a long, fruitful association between the two companies, allowing for other gas supply opportunities to be explored.”

Appea COO of the Western region, Stedman Ellis, said the agreement undermined claims by pro-gas reservation lobby groups that Western Australians were struggling to secure long-term gas supply.

“The DomGas Alliance has consistently sought to justify ongoing government intervention in the Western Australia domestic gas market by claiming that its members cannot secure the volumes of gas and the length of contracts they need. But the long-term contract signed by Santos and Alcoa, which is a key member of the alliance and Western Australia’s single biggest gas user, shows there is no difficulty obtaining domestic gas supply.”

Ellis added that long-term gas supply agreements were available as long as customers were prepared to pay prices that reflected the high cost of exploration and development.