Santos GLNG announced completion of the first of three major gas processing hubs in its Queensland gas fields, signaling continued progress towards its first LNG in 2015.

“This is a great story for Queensland,” said Trevor Brown, Santos’ vice president, Queensland, in making the announcement. He cited ongoing investment to the state that will average $1 billion during 2016-2020, and an average $500 million after that time.

“That means long-term jobs for Queenslanders over the next 20 to 30 years,” he said. “This adds to the $6.2 billion we’ve invested with Queensland businesses in building our project to this point, and the $200 million invested in roads, hospitals, schools, weed management and events.”

Adelaide-based Santos closed up 3 cents on the ASX on Nov. 6 at $12.54. That is 17.4 per cent below its high for the year, reached in August, and 10.6 per cent below its average for the past 12 months.

Despite market ambivalence, analysts are generally positive, with most price targets in the range of $14 to $18.

“We think the market will take comfort in the CY14 guidance being maintained and solid indications of progress towards 2H15 startup of GLNG,” JP Morgan assessed in its third-quarter research note. “We are maintaining our Overweight recommendation and sector preference for Santos.”

JP Morgan attributes weak gas prices to the upcoming ramp-up of East Coast LNG exports, with customers exercising “volume flexibility to defer contract purchases. While Santos does not sell any gas into the very weak spot market (electing to dial back production or store produced gas) its overall selling prices have been negatively impacted”.

Gas price increases are likely, the report continued, as a result of commencement of the Horizon contract with GLNG in the second half of 2015 and expiration of the AGL contract in the Cooper Basin in the second half of 2016.

Completion of the hub follows delivery of first gas into the Santos GLNG pipeline in October and completion of hydrotesting in the second LNG storage tank on Curtis Island.

“We’re making excellent progress,” Brown said. “First gas is scheduled to arrive at our plant on Curtis Island later this year, we’re approaching 90 per cent complete, we’re on budget and on track to deliver first LNG in 2015.”

Joseph Markman can be reached at jmarkman@hartenergy.com.

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