Why Australia’s LNG future could hinge on Browse Basin

Oil and gas producer Santos (ASX: STO) could be accused of having its fingers in a lot of pies at the moment. The company has an Asian-focused exploration portfolio spread across Indonesia, Vietnam and Papua New Guinea, and is involved in four major projects, including the massive GLNG development and PNG LNG in conjunction with Oil Search (ASX: OSH).

Now Santos has its sights set firmly on the Browse Basin, which it believes is a pivotal area in the development of Australia’s LNG industry. The Browse Basin has estimated gas reserves of more than 15.9 billion cubic feet (bcf) and is seen as Australia’s best opportunity for significant LNG development to help meet the growing demand for LNG, which is forecast to double by 2030.

Speaking at the Australian Gas and Technology Conference in Perth, Santos Vice President of Western Australia and Northern Territory John Anderson is quoted by the Associated Press as saying “this particular basin will probably stand at the forefront of hopefully picking up a lot of that new prize LNG”.

Santos holds four exploration permits in the Browse Basin and last month announced a new gas discovery under one of its blocks. However the debate around how these gas discoveries are to be developed still rages between politicians, environmental groups and the companies wanting to extract the gas.

Woodside Petroleum (ASX: WPL) holds significant gas acreage over three fields in the Browse Basin, but has been plagued by delays in development as it tries to reach a compromise between the likely high production costs and the needs of the local community.

Woodside has expressed preference for using floating LNG (FLNG) technology to extract and process the gas without bringing it to shore, a concept thought to offer significant cost savings compared to an onshore processing plant, but it is opposed by Western Australia Premier Colin Barnett. Santos’s John Anderson believes that companies are being pushed towards FLNG out of necessity to minimise project and ensure an adequate return on investment.

Foolish takeaway

Santos has a number of significant LNG projects set to come online in the next two years, but the company is keeping its eye firmly on its long-term growth, which is where it sees the Browse Basin. Raising awareness of the importance of the area will help remind all parties what is at stake and hopefully help speed up the transition from discovery to production.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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