Santos is expecting $US1.5 billion loss on the value of its Gladstone LNG (GLNG) Project when it announces its 2016 half-year accounts.
The loss comes as sustained low oil prices continue to constrain capital expenditure and impact on the project.
Santos Chairman Peter Coates AO said the expected impairment is obviously disappointing but a “consequence of the challenging environment we now face.”
As a result, Santos has adjusted its long-term operating assumptions for GLNG to reflect the current oil price environment.
Despite this, Mr Coates is confident that LNG prices will bounce back.
“We firmly believe in the strong long-term growth of LNG consumption and demand globally,” said Mr Coates.
“GLNG will continue to be an important part of our LNG growth portfolio and a key supplier of LNG to the Asian market.”
Meanwhile, Santos Managing Director and CEO Kevin Gallagher says low oil prices will continue to challenge the upstream sector particularly, but also the industry as a whole.
“At GLNG we are seeing the effects of ongoing constraints on capital expenditure and a softer LNG market,” said Mr Gallagher.
“We are experiencing a slower ramp up in production of GLNG equity gas and the price of third party gas has increased.
“We have therefore adjusted our assumptions regarding upstream gas supply and third party gas pricing, which will not affect GLNG’s ability to meet its LNG off-take commitments.
“We will continue to maintain a disciplined approach to capital allocation, reducing costs as seek opportunities to optimise our asset portfolio in a manner that delivers value to shareholders.”
The $A20.5 billion GLNG 7.8 MMt/a LNG facility on Curtis Island, Queensland, is a joint venture between Santos (30 per cent) and PETRONAS (27.5 per cent), Total (27.5 per cent) and KOGAS (15 per cent).