Santos Limited · ASX:STO
Santos — Australian Institute of Energy Conference 2012
29 slides from Santos's conference presentation, Nov 19, 2012
Slide 1: Australian Institute of Energy Conference 2012
Australian Institute of Energy Conference 2012 Address by David Knox CEO & Managing Director, Santos Ltd Monday, 19 November 2012 Fuelling Nations: The role of gas 1
Slide 2: Disclaimer and Important Notice
Disclaimer and Important Notice This presentation contains forward looking statements that are subject to risk factors associated with the oil and gas industry. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a range of variables which c
Slide 3: Fuelling Nations – The Role of Gas
Slide 2: Fuelling Nati tions – The Role of Gas I’m very pleased to be invited by the Australian Institu tute of Energy to talk with you today. Energy is often takenn for granted, and yet it underpins ins our way of life. It sustains our e economy and builds nations. This is why I commend the AIE on
Slide 4: Three subjects: the US, the regional energy challenge, Australia's investment
1. First I’ll look to the US, and discuss the massive change that is happening to their energy economy. 2. Second, I’ll explore the energy challenge facing our region, and the pivotal role that gas is playing to address this. 3. Third, I want to look at what Australia can and must do to ensure we co
Slide 5: Shale gas has been a game changer in the US
Slide 3: Shale gas ha as been a game changer in the e US Let me start with the e US, and the surge in the availa ability of gas caused by the commer ercialisation of its vast shale gas resources. r It is worth pointing o out that energy markets norm mally change slowly, by evolution ra rather than r
Slide 6: US shifts from LNG import plans to self-sufficiency
Some of you may remember the famous picture of John Howard shaking hands with Arnold Schwarzenegger, amidst discussions to win support for BHP’s planned LNG import terminal off the coast of Malibu. “California is desperate for LNG” or so the headlines ran. That was in 2004. Roll the tape forward to
Slide 7: US gas resource is now abundant
Slide 4: US gas resou ource is now abundant It is not only an abun ndance of natural gas that chara racterises the US economy today, bubut the low cost to develop it. Based on current cons nsumption rates the US today iss estimated e to have more than 35 ye years of gas supply that could the eoretic
Slide 8: US gas price history and drilling boom
The current low cost which is revolutionising the US economy is not solely because of an abundance of gas. Of course you need the right geology, but it has also been the investment and innovation in the US gas sector which has contributed to unlocking this huge resource. To understand where the US i
Slide 9: Revival in US oil production
Slide 5: Revival in US S oil production Now this is not the end nd of the remarkable story. The success su of the US gas story, the strstrength of its exploration capac city, and the development and subs bsequent transfer of the technolo logy used for shale gas, has also led ed to a revival in US oi
Slide 10: US energy independence forecasts and implications
Forecasts are not for the faint hearted, but we shouldn’t mistake the determination of the United States, its oil and gas industry and its Government to achieve this. The implications of success are great not just for energy markets, American consumers or their industry, but for foreign policy as we
Slide 11: Urbanisation is driving energy demand
Slide 6: Urbanisation n is driving energy demand Let me now move on n to the energy challenge facing Australia A and our region, and the role ole of gas in meeting this challenge ge. Now, it goes withoutt ssaying - Australia is not the Unit ited States of America. Our popul ulation is smaller, our d
Slide 12: Australia in the Asian Century
The Prime Minister and the Australian Government should be commended for their initiative to map out the transformation taking place in Asia and to construct a narrative as to how our nation can grasp these opportunities through the “Australia in the Asian Century” White Paper. The world we are a pa
Slide 13: Asian energy demand and China's consumption
communities migrating to urban centres and cities and people seeking access to heat, light and mobility. Here again, China has led the pack - it is now the world’s largest energy consumer, having gone from consuming less than half as much energy as the United States in 2000, to consuming slightly mo
Slide 14: Energy choices
Slide 7: Energy choic ices How this increase in n energy demand is met, will be dependent upon how our Asian ne neighbours make choices about their th fuel mix. Will their local growth th be met by coal, oil, gas, nuclelear power or renewables? Ultimate tely some combination of all the e fuels will
Slide 15: Oil reserves and oil prices
found mainly in OPEC countries with little easy access to investment from International Oil Companies. This lack of accessibility brings into perspective the United States’ drive for energy self-determination. It also makes clear the considerable constraint on the world’s ability to meet oil demand
Slide 16: Australian LNG projects
Slide 8: Australian LN LNG projects Asia’s transformation and its energy challenges are e resulting in global projections for or gas demand skyrocketing. In fact the demand for gas is proj ojected to grow by more than 50% %, faster than any other fossil fuel in the 25 years to 2035. This is where Au
Slide 17: Santos LNG project stakes and Australian gas supply
To put this in perspective, the iconic Snowy Mountains Hydroelectric Scheme has long been considered as Australia’s largest infrastructure project. The Scheme took 25 years to build at the cost of around $6 billion in today’s money. Santos has equity stakes in four LNG projects, three of which are i
Slide 18: Export market and cost of Australian gas
These resources while abundant are in reality more costly to produce. If it were not for the export market, much of this gas would remain in the ground. It is this increase in demand from Asia and the ability to sell LNG into Asia at oil-linked pricing that has led to the unprecedented scale and pac
Slide 19: Free market and regulatory stability
I’m not saying we can duplicate the US experience here in Australia overnight. As I have said we are different – we may be of similar size, but Australia’s gas infrastructure is much less developed. But by allowing the free market to work, attractive international gas prices will provide the incenti
Slide 20: Economic benefits of oil and gas investment
increase in GDP equal to circa 20% of the economy’s current annual output, solely as a result of the proposed oil and gas investments and their projected output. At the same time this tremendous level of investment creates the opportunity to develop a world class oil and gas sector, supported by an
Slide 21: Competition from new regions of supply
Slide 9: Competition n from new regions of supply I would now like to turn urn to a critical point in my discuss ssion with you today. How to ensur ure that the future pipeline of investment in in Australia’s gas industry try is realised? Beyond the committe ted projects, the pipeline of Aus ustrali
Slide 22: Uncontracted Asian LNG demand and cost competitiveness
The prize up for grabs for Australia and its competitors is nearly 90mmtpa of uncontracted Asian LNG demand in 2020. The challenge today is for Australian LNG to remain cost competitive so that new projects are sanctioned to meet both Asian and domestic demand. Without these additional projects goin
Slide 23: Australian LNG project cost inflation
Slide 10: Australian L LNG project cost inflation And, Australian proj rojects are getting more expe pensive. The Australian LNG projeccts currently under construction are a now 80% more capital intensivee than those already in operation.. A lot of this cost is labo bour, with the cost of Australian
Slide 24: What Team Australia can do: change and regulation
As individuals and organisations, and even governments – we need to be more productive, we need to continue to learn, apply ourselves better, and we need to be more disciplined and get value for our money. We shouldn’t increase the reward for doing the same thing, but instead we should strive for an
Slide 25: Reducing costs through scale and innovation
believe that we should aim to go beyond cost control. We should aim to be competitive in this space and significantly reduce our costs. I believe this is achievable, and the US onshore gas industry showed the world how this could be done. Through building scale, through actively learning new techniq
Slide 26: Addressing the skills challenge
brightest professionals and hardest working individuals with experience characterized by its depth and breadth. To equip ourselves with these individuals we are right to continue to invest in skills development, education and training programs at home. This is necessary. But we also need to change t
Slide 27: Industry collaboration
Finally, we as an industry need to be more open to collaborating, especially in non-commercial areas where it makes good sense. At Santos we’re open to bigger and further collaboration, especially where it avoids duplication and creates synergies. Two strikingly obvious places for Santos to collabor
Slide 28: Conclusion
CONCLUSION So, thank you for your ur time today. And thank you aga ain to AIE for the opportunity to be h here. I am confident that we are making progress to secureure an energy future for Australia. Bu But more needs to be done, and done d now. The challenge to ourr industry is not insignificant, w
Slide 29: Closing remarks and thank you
It requires us to access Asian markets and to do so openly and without restrictions to labour markets. It requires the development of resources at scale, and it requires productivity leaps and a commitment from Team Australia to achieve this. I believe that Santos and the oil and gas industry can re
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