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Santos prepares for oil, gas and LNG expansion

Santos (ASX: STO) delivered an investor briefing on its Australian petroleum production and exploration business units last week, providing shareholders with a unique peek into this energy company’s projects and progress. Here’s what you need to know.

Drill, baby, drill

On the domestic gas front, Santos is enjoying its highest ever production from Carnarvon Basin, due primarily to its Reindeer and Spar operations. The company is also expanding its gas drilling elsewhere, which should provide “multiple growth options” in Santos’ future. A 25,000-square-km interest in the McArthur Basin provides a sleek combination of significant reserves and easy infrastructure access for domestic consumption or LNG export.

Looking ahead, the company will focus on building out its base gas capacity by 30% while ensuring the reliability of its existing facilities. With increasing energy demands and expiring gas contracts for NSW in 2014, Santos will focus on its Narrabi development to increase gas provisions between 2016 and 2019.

Santos’ Fletcher Finucane offshore project went operational on May 20, ahead of schedule and on budget. It’s currently producing 445,000 barrels/day and is estimated to enjoy a 15,000 barrels/day average gross production rate for the first year. In total, Santos estimates the site has 14 million barrels on offer. As an additional bonus, Fletcher Finucane also enables Santos’ Mutineer Exeter to keep pumping 3,500 barrels of oil per day over the next year.

Can it float?

The company’s proposed Bonaparte LNG joint venture with GDF Suez have some investors worried over increasing costs, but Santos says it’s on track for approval. It’s awarded design contracts to two firms, and is targeting FEED (Front-End Engineering and Design) entry for late 2013/early 2014. It’s also exploring the possibility of a Caldita Barossa project in partnership with SK E&S, who has agreed to fund up to $520 million in various payments.

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Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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