PERTH Dec 19 Australia's Santos Ltd has signed a second gas purchase agreement with rival Origin energy to help supply its Gladstone liquefied natural gas (LNG) export plant in eastern Australia, Santos company said on Thursday.
Origin will supply Santos with 100 petajoules (PJ) of gas at oil-linked prices for five years beginning in 2016, adding to an earlier agreement with Origin for a supply of 365 PJ over a 10 year period.
Under the agreement, Origin can supply an additional 94 PJ of gas during the same five-year period.
The agreement comes amid some uncertainty about Santos' ability to fully supply its $18.5 billion Gladstone plant with enough gas.
"The key controversy for Santos remains whether the underlying coal seam gas resource base and contracted third party gas can meet supply obligation for two LNG trains," Neil Beveridge, an analyst with Bernstein Research in Hong Kong said in a note earlier this month.
"Based on experience from other CSG basins, we believe there are risks of supply shortfall," Beveridge added.
In addition to its purchase agreements with Origin, Santos also has purchase agreements for 750 PJ of gas over a 15-year period.
Santos owns 30 percent of the project, while Malaysia's Petronas and Total own 27.5 percent each. GLNG has binding offtake agreements with both Petronas and South Korea's KOGAS for 3.5 mtpa over 20 years.
Gladstone LNG is one of three coal seam gas to LNG export projects on Australia's eastern seaboard, with BG Group bringing its Queensland Curtis Island LNG plant online in 2014 and Origin and ConocoPhillips' Australia Pacific LNG bringing a plant online in 2015.