Australia's Santos buys pipeline route for undeveloped gas project

The logo of Australian oil and gas producer Santos Ltd is pictured at their Sydney office February 15, 2016. REUTERS/Jason Reed/File Photo

Aug 11 (Reuters) - Australia's Santos Ltd (STO.AX) said on Thursday it had bought a company that owns an approved underground pipeline route that could transport natural gas from its planned Narrabri project, aiming to supply the domestic market around mid-decade.

Santos did not disclose the price it paid to buy Hunter Gas Pipeline Pty Ltd but a spokesperson said it was "not a significant sum".

Australia's second-largest independent gas producer said it would work with infrastructure developers and owners to build the pipeline, which Hunter Gas Pipeline has previously said would be valued at A$1.2 billion.

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Santos said it plans to start construction in early 2024.

The company's long-delayed Narrabri project is awaiting regulatory approval that would allow it to start appraisal drilling. Santos has said it would need about two years of appraisal drilling before it would be near a final investment decision on the project.

This month, the competition watchdog Australian Competition and Consumer Commission (ACCC) recommended restrictions on exports of liquefied natural gas (LNG) to avert a gas supply shortage, which the government is reviewing. read more

"At a time when the ACCC is forecasting domestic gas shortfalls, our Narrabri project ... will inject new supply into southern domestic markets and put downward pressure on gas prices for New South Wales businesses," Santos Midstream and Clean Fuels President Brett Woods said in a statement. (https://bit.ly/3bHJIed)

"Once fully operational, Narrabri has the potential to deliver more than half New South Wales' gas demand."

The Narrabri project is in the state of New South Wales (NSW), Australia's most populous state, which depends on gas from neighbouring states for all its of its supply.

The Hunter Gas Pipeline has planning approval for an 883 km (550 mile) pipeline from Wallumbilla gas supply hub in Queensland to New South Wales, according to Hunter's web site.

That would provide a second route from Queensland to southern markets, where gas is needed. Currently, that route is served only by a pipeline owned by APA Group (APA.AX).

"In our view, the acquisition highlights Santos is keen to see its Narrabri project move forward which is currently valued at nil by the market and would solve a large part of NSW's current gas needs," Morgan Stanley analyst Adam Martin said in a note.

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Reporting by Sameer Manekar in Bengaluru and Sonali Paul in Melbourne; Editing by Rashmi Aich, Robert Birsel

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