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Santos announces GLNG impairment charge

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World Coal,

Australian gas company Santos has announced a US$1.05 billion post-tax impairment charge (US$1.5 billion pre-tax) on the carrying value for its Gladstone LNG project on the back of lower gas prices, which have constrained capital expenditure at GLNG.

This has slowed ramp-up of GLNG equity gas. Meanwhile, the company has also been hit by an increase in third-party gas priced.

“The expected impairment charge of GLNG is clearly disappointing but it is a consequence of the challenging environment which we now face,” said Santos Chairman Peter Coates. “We have decided to adjust our long-term operating assumptions for GLNG to reflect the reality of the current oil price environment.“

Despite this, the company “firmly believes in the strong long-term growth of LNG consumption and demand globally,” Coates continued. “GLNG will continue to be an important part of our LNG portfolio and a key supplier of LNF to the Asian market.”

GLNG produces LNG from coalbed methane (CBM: called coal seam gas in Australia) sourced from Queensland’s coalfields. Santos has led development of the project in partnership with Malaysia’s PETRONAS, Total from France and KOGAS from South Korea.

In May, the company said it had begun production of LNG from GLNG Train 2 after first production of LNG from Train 1 in September last year. GLNG exported its first LNG export cargo in October 2015.

The impairment charge will be non-cash and not impact the company’s debt facilities, the company added.

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