Santos Limited

Santos Ltd.

Type	Public
Traded as	ASX: STO
Industry	Energy
Founded	18 March 1954
Headquarters	60 Flinders Street Adelaide, South Australia, Australia
Key people	David Knox, CEO
Products	gas and petroleum exploration; the production, treatment and marketing of coal seam gas CSG, liquefied natural gas LNG, crude oil, condensate, naphtha and liquid petroleum gas; transportation by pipeline of crude oil
Revenue	A$2.762 billion (2008)
Net income	A$1.65 billion (2008)
Number of employees	~1,200(2015)
Website	www.santos.com

Santos Ltd. is a large, predominantly Australian owned oil and gas company. Its name is an acronym for South Australia Northern Territory Oil Search.

Operations

Santos is one of Australia's largest domestic gas producer, supplying sales gas to all mainland Australian states and territories, ethane to Sydney, and oil and liquids to domestic and international customers. The company's core business was built on gas and oil discoveries in the Cooper Basin, predominantly spanning north-east South Australia and South West Queensland. These gas reserves are the main source of natural gas to Australia's eastern states. Santos is the primary venture partner and operator of natural gas processing facilities at Moomba (in South Australia) and Ballera (in Queensland), and pipelines connecting those facilities with Adelaide, Sydney, Melbourne, Brisbane, Rockhampton and Mount Isa.

It has made significant discoveries in the Browse Basin, off the northwest of Western Australia. On 22 August 2014 the company announced a major gas-condensate discovery at the Lasseter-1 exploration well in WA-274-P in the basin, in which Santos has a 30% interest in company with Chevron (50%) and Inpex (20%). It was the second major discovery by the company in the area in two years.

Santos also loads product onto small Cape vessels at Port Bonython in South Australia.

Santos drill rig near Innamincka in cooper basin 1959

Santos has its headquarters in Adelaide. It also has offices in Brisbane, Perth and Jakarta. As of 2015, the company's managing director is Scotsman David Knox. He replaced John Ellice-Flint in 2008.

International activities

The company also participates in on- and off-shore oil and gas exploration and production ventures throughout Australia, in the Timor Gap, Indonesia, Papua New Guinea, India, Bangladesh, Egypt, Vietnam and Kyrgyzstan.

LNG

Santos has an interest in the Darwin LNG project, exporting liquefied natural gas to customers in Japan. It is also developer of the Gladstone LNG project in Queensland and is a partner in the PNG LNG project.

Financial results

Santos's production for 2008 was 54.4 million barrels (8,650,000 m³) of oil equivalent. Earnings before interest, taxes, depreciation, amortizations and exploration expenses for the period was A$2.8 billion, representing after tax profit of A$1.65 billion. On 22 August 2014 the company said its oil production was at its highest level in six years. For the first half of 2014, Santos recorded sales revenue of $1.8-billion, an increase of 20% on the comparable period the previous year. Sales volumes rose by 5% to 28.9-million barrels of oil equivalent. As a result of the company writing-off its investment in a coal seam gas project in Indonesia, the 2014 first half profit being down 24% at $206 million. In 2015, Santos financial troubles became more evident as the share price crashed to 1/3rd of its value from the previous year. It hit a 12-year low and has stayed low since. This occurred because of mounting debt and an oil price slump. CEO David Knox was forced to leave, with chairman Peter Coates stepping into the role and leading a strategic review of the gas company. options of partial asset sale, even takeovers has been speculated including "No options will be ruled out from consideration, but neither is any particular option a preferred course at this time," Mr Coates said in a statement.

Political lobbying

Santos has engaged Adelaide-based consultancy Bespoke Approach to lobby the Australian Government and the State Governments of New South Wales and Queensland. Other lobbyists which have represented Santos include: Kreab Gavin Anderson (Australia) Ltd and Craig Emerson Economics.

Incidents

NASA satellite image of the Sidoarjo mud flow site, November 11, 2008.

Moomba explosions, South Australia

2001

In June 2001, a pump exploded at the liquids pumping station killing Process Operator Colin Jeremy Sutton. Another worker received burns to the neck and hand. In the South Australian State Industrial Relations Court, Santos pleaded guilty to three counts that it had "failed in its most basic responsibility as an employer" by not ensuring its employees were safe from injury and risk to health. The company was fined $105,000. The magistrate said Santos had failed to supervise Sutton or train him in the use of an emergency shutdown device.

2004

On January 1, 2004, an explosion occurred at Santos' Moomba processing facility. The blast was traced to the Liquids Recovery Plant (LRP), where an inlet manifold and a related flange weld both failed after corrosion by mercury. Mercury was released along with a cloud of flammable gases including methane, ethane, propane and butane. Workers saw the cloud and raised the alarm, shutting down the plant and evacuating to designated safety points. Some workers allegedly did not hear the emergency alarms. The gas cloud ignited on contact with a heating unit 150 metres away, and an explosion followed. The plant was seriously damaged.

Moomba workers who sought to remain anonymous told The Australian newspaper on January 5 that the company was running a "cowboy" operation, and that it was luck, not management that had prevented any loss of life. They also said that the emergency muster area was too close to the plant in the event of a major tank explosion.

Gas supplies to South Australia and New South Wales were interrupted, leading to down-time in the manufacturing sector and short-term rationing measures in both states while repairs were made. Santos spent $40 million on remedial action following the incident. In 2011, the South Australian industrial relations court ruled that 13 employees had been placed at risk due to critical safety shortcomings. These included an inadequate risk assessment which failed to identify the likelihood of plant failing due to liquid metal rendering it brittle. The company pleaded guilty to breaching the Occupational Health Safety and Welfare Act after a SafeWork prosecution and was fined $84,000.

Sidoarjo mud flow, Indonesia

In May 2006, the Sidoarjo mud flow disaster occurred in East Java, Indonesia. Controversy exists surrounding the probable cause of the disaster which has displaced approximately 10,000 people and covered villages, farms and industrial areas with mud. The eruption is ongoing, though since 2011 the rate of flow has reduced.

As of 2013, the contended probable causes are: drilling for oil and gas, an earthquake with its epicenter some 250 km distant or a combination of the two.

Santos owned an 18 percent stake in the project which was drilling in the area at the time, under the control of PT Lapindo Brantas and in partnership with private Indonesian oil and gas company MedcoEnergi (50% and 32% stakeholders respectively). Santos' stake in the project was sold to Minarak Labuan, the owner of PT Lapindo Brantas in December 2008. Labuan also received a payment from Santos of $US22.5 million ($A33.9 million) "to support long-term mud management efforts". The amount was covered by existing provision for costs relating to the incident. Santos had provisioned for $US79 million ($A119.3 million) in costs associated with the disaster.

Santos had stated in June 2006 that it maintained "appropriate insurance coverage for these types of occurrences".

Port Bonython groundwater contamination, South Australia

Santos' Port Bonython facility and hydrocarbon export jetty, South Australia.

In May 2008, groundwater contamination was reported to the Environment Protection Authority (EPA) following detection at Santos' Port Bonython site, Spencer Gulf, South Australia. Hydrocarbons were found floating on and in the groundwater. 150 inspection wells were later established, and a 450m long cement bentonite wall was constructed 'to stop the further spread of contamination off-site' including to the marine environment. In May 2012, Santos reported declining rates of hydrocarbon recovery from groundwater extraction wells and claimed that their remediation efforts were working.

Pilliga CSG wastewater spill, new South Wales

In 2011, a 10'000 litre spill of toxic coal seam gas water occurred killing native vegetation and soil. The water contained dangerous levels of lead, mercury, sodium and other heavy metals. In 2015 this spill site can still be seen as unsuccessful rehabilitation is deemed near impossible due to the elevated salt levels in the soil.

Jackson oil spill, Queensland

In May 2013, an uncontrolled oil spill was reported in Santos' Zeus field near Jackson in Queensland's remote south-west. The flow lasted 'almost a week' before international experts were able to contain it. The rate of flow was estimated at 50,000 litres per day.

Uranium contamination of Narrabri aquifer, New South Wales

In 2013 it was discovered that underground aquifers in the Pilliga Forest has been contaminated with toxic levels of heavy metals and uranium 20 times above the safe drinking levels. This occurred from leaking coal seam gas evaporative ponds at the Bibblewindi water storage site. All previous attempts to remove that pollution has failed.

Light pollution from gas flares

In 2014 astronomers from Australia's premier observatory, Siding Spring Observatory, in the neighbouring town of Coonabarabran highlighted the potential damage being caused by artificial light pollution and flaring. Flaring occurs as a cheap way to dispose of unwanted gas. It also increases light pollution in the night sky. With the plan of 7 major gasfields in the region, astronomers warned of the loss of Australia's only optical science research facility and what that would mean for future discoveries. Astronomers are also concerned of the material dispersed from coal seam gas operations will be corrosive to telescope mirrors.

Water resource use

Santos Ltd's water extraction volumes by source within South Australia 2009 to 2013.

Santos' activities draw significantly on available water resources. In 2013, the three jurisdictions in which Santos withdrew the greatest volume of water were Indonesia (12.5 gigalitres), Queensland (7.5 gigalitres) and South Australia (7 gigalitres). The company's water resource extraction and use is published in an annual Sustainability Report.

Sponsorship

Santos sponsors the Museum of Economic Botany at the Botanic Gardens of Adelaide.

Santos sponsors many community activities, events, institutions and projects in jurisdictions where they operate commercially. In October 2014, The Advertiser claimed that Santos spends $10 million annually on South Australian community groups, events and institutions. Figures published in Santos' 2014 Sustainability Report state that $7,487,731 was spent on 'Community investment' in South Australia that financial year and $3,108,057 in Queensland. Other jurisdictions received between $5000 (South Korea) and $775,255 (Western Australia) and the total 'community investment' spent across all regions during 2013-14 was $13,217,617.

Recipients have included:

In South Australia

• Adelaide Symphony Orchestra
• Botanic Gardens of Adelaide
• Come Out Festival (2009) - People's Puppets Project, Whyalla
• Committee for Adelaide - founding member
• OzAsia Festival
• RiAus - 5 million AUD foundation partner
• Santos Conservation Centre at the Adelaide Zoo
• Santos Stadium athletics venue
• Santos Tour Down Under UCI World Tour cycling event
• The Smith Family
• University of Adelaide - Australian School of Petroleum - 25 million AUD over 10 years

In Queensland

• Queensland Art Gallery - 1.5 million AUD over 5 years
• Santos GLNG Food & Fire Fest
• Queensland Police Service's Stay on Track Outback road safety campaign (2012-2014)

'Stay on track outback' controversy

In December 2014, photographs showing Queensland police vehicles featuring Santos company logos created controversy and pushed the topic of corporate sponsorship of police activity into the mainstream media. Santos contributed approximately $40,000 to the program. Queensland Police commissioner Ian Stewart described the vehicles as "PR vehicles that we use at shows, we use at expos, all of those sorts of things just as any PR machine would be used by a company or another government organisation."

Online activists referred to the sponsorship as a "conflict of interest" and "a bloody disgrace" with Stop Brisbane Coal Trains spokesman John Gordon calling for the logos to be removed. The Lock the Gate Alliance also spoke out against the deal. Spokesperson Drew Hutton stated that "Advertising a company like Santos, which is a big coal seam gas company in Queensland, on the side of vehicles of the police whose job it is to enforce the law - including I might add against protesters who don't like coal seam gas - is a really bad idea... Lock the Gate would not be able to sponsor a police car - nor should it. Neither should a company."

Santos responded by stating that the company was "proud to support a program that promotes safe driving and is saving lives in outback Australia." Queensland's Police Minister Jack Dempsey defended the program and its sponsors stating "The Queensland Police Service's 'Stay on Track Outback' is an award winning road safety program aimed at keeping communities safer and reducing road trauma in regional Queensland. It has been in place since 2012 thanks to support from a number of sponsors."

Fossil fuel divestment

In October 2014, the Australian National University sold its shares in Santos and several other companies in the nation's most reported case of fossil fuel industry divestment. Santos responded by claiming that gas is necessary in the state's future energy mix and The Advertiser published its economic value to the state. At the time it was reported that Santos employed 3500 people nationally, thousands of contractors and had a $13 billion market value.

Politicians expressing their support for the company included the Prime Minister Tony Abbott and Federal MPs Jamie Briggs, Christopher Pyne, James McGrath, Greg Hunt and Treasurer Joe Hockey. Several senior state ministers also spoke out against the decision to divest in South Australia and Queensland, including South Australian Treasurer Tom Koutsantonis. Former Liberal party leaders John Hewson and Malcolm Fraser both supported the University's right to choose how and where to invest its money.

The University's Chancellor Gareth Evans told Australian Mining "Neither I nor the vice-chancellor nor any other ANU council member to my knowledge has described Santos specifically as a 'socially irresponsible' company." In a letter to Santos CEO David Knox, Evans said the university regretted any embarrassment suffered by Santos over the decision to divest.

Further reading

• Weidenbach, K. (2014): Blue flames, black gold: The story of Santos. Santos Pty Ltc. ISBN 9781921037399

External links

• Official website