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Santos sets production and emissions targets

Santos sets production and emissions targets

Photo by Bloomberg

1st December 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Oil and gas major Santos has increased its production guidance for 2020, lowered its cost guidance for the year, and set a net-zero emissions target for 2040.

At an investor day in Sydney, the ASX-listed Santos increased its production guidance from the previous 83-million to 88-million barrels of oil equivalent, to between 87-million and 89-million barrels of oil equivalent, on the back of strong operating performance across the base business.

The upgrade in production represented 15% to 18% production growth for the year, and growth of more than 50% since 2015.

The oil and gas producer has also lowered its cost guidance for 2020 to between A$8/bl and A$8.50/bl of oil equivalent, while capital expenditure for the full year is still expected at some A$900-million, consistent with the previous capital spend reductions announced in March this year, in response to the Covid-19 pandemic.

“Our strategy has been to establish a disciplined low-cost operating model that delivers strong free cash flows through the oil price cycle. Our 2020 forecast free cash flow breakeven oil price is less than $25/bl before hedging and around $20/bl after hedging,” MD and CEO Kevin Gallagher told investors.

“Our base business is strong with production levels expected to remain relatively steady for the next decade and providing significant free cash flow. This cash flow combined with a strong balance sheet and control over the timing of our major projects, means we are well positioned for disciplined growth.”

Santos on Tuesday also announced another significant step towards a final investment decision for its Barossa project, with the Darwin liquefied natural gas approving tolling agreements to transport and process Barossa gas through its facilities.

The Barossa gasfield sits within Santos’ Northern Australia portfolio, one of the company’s core long-life natural gas asset regions. The project is currently in the front-end engineering design phase, which includes the floating production, storage and offloading facility, subsea production system and gas export pipeline.

Meanwhile, Santos has also set a net-zero emissions target by 2040, with Gallagher telling shareholders that the new emissions target was designed to support Australia’s commitment to the Paris Agreement, including a 26% to 30% reduction in scope 1 and 2 emissions by 2030.

“Our focus over the last three years on step change technologies such as carbon capture and storage has enabled a pathway that allows us to go further faster when it comes to emissions reduction,” Gallagher said.

Edited by Creamer Media Reporter

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