Developing the Territory’s onshore gas potential

Colin Cruickshank

Katherine Regional Mining and Exploration Forum May 2014

Santos Overview

A leading energy company in Australia and Asia

• Founded in 1954

• Top-20 ASX listed company

• 3500 employees

• Production of 51 mmboe

• Proved and probably reserves of 1,368 mmboe

• 2013 sales revenue $3,602m

• 2013 net profit $516m after tax

• Extensive exploration, development and production operations through Australia and SE Asia

Otway Basin

Phu Khanh Basin

Nam Con Son Basin

East Java Basin Papua New Guinea

Carnarvon Basin

Browse Basin

Timor Sea & GapBonaparte Basin

Amadeus Basin

Cooper Basin

Surat/Bowen

Basins

Gippsland Basin

Exploration

Development

Production

Gunnedah Basin

South Sumatra

Bay of Bengal

McArthur Basin

Santos’ onshore NT footprint

A critical region for Santos, now and into the future

Amadeus Basin Farm-in compliments

existing Mereenie oil and gas field

Seismic and drilling program underway

McArthur Basin Liquids-rich shale play Drilling in June

Mereenie Operator since 1993 25 employees at site Producing 600 barrels

per day Appraisal and

development program underway

Natural Gas

• All natural gas (conventional or unconventional) is predominately methane

• Differentiator is the rock the gas is trapped in and the process required to produce it

Conventional Gas or Unconventional Gas

Petroleum Operations Overview

Exploration - Seismic Exploration / Development - Drilling

Production

Well Construction / Integrity

Wells are designed to completely isolate all aquifers

• Drilling stops at regular intervals so that purpose-built steel pipes – or casing – can be installed

• Several layers of protective cement and steel casing separate the operations within the well from formations and aquifers

• Specially formulated cement mixture.

• Casing is pressure tested above operating pressures to ensure well integrity

• Wellbore design, construction and operations regulated in the NT

• Regulators are kept fully informed on well bore integrity

• Integrity of each casing and cement stage is verified prior to next operation

Fracture Stimulation

• Accelerates the release of oil and gas

• A fluid mixture of 99% water and sand plus a very small amount of chemicals is pumped down the well bore at controlled pressure to open passageways into the rock

• The fluid carries the fine sand into the cracks, and the sand props the cracks open, allowing hydrocarbons to flow back into the well bore

• Has previously been used in the Territory and extensively around Australia and the world for decades

• All fracture stimulation activities will comply with NT Government regulations

What is it?Process used to enhance the productivity of a well

Water Management

Drilling

• On average up to 1 ML of water is used for each well drilled.

Fracture Stimulation

• Up to 20 ML of water is used to fracture stimulate the well

• Depends on number of stages

• Vertical wells up to 10 stages / Horizontal wells up to 30 stages

Sources of Water

• This water is sourced from existing local bores, and captured rainfall and recycled where practical.

• Does not need to be potable

• Wells are lined with steel casing and cement to isolate and protect aquifers

• Fluid flowback is captured into containment tanks / lined pits

• Fluids disposed of under approved Govt approvals

Baseline Assessment Plans

• include registered bore testing programs to establish baseline information about groundwater including;

• water levels, total dissolved solids and general water quality.

Water used in well construction – drilling and fracture stimulation

Well Construction Drilling / Fracture Stimulation

• Potential water impacts from well construction activities

• Spills and leaks at surface

• Migration

• Mechanical failure of well

• Gas zone is separated from aquifers by thousands of metres of impermeable rock, creating a natural barrier and preventing gas or fluids migrating into aquifers

• Integrity of well minimises risks along with operational safeguards during fracturing process

Potential Water Impacts – Risk Management

Well De-commissioning

• Once well is no longer economic to produce it needs to de-commissioned

• Cement plugs placed to isolate and protect aquifers from depleted hydrocarbon zones

• Placement and verification of plugs is critical step

• Well head cut off below ground level, cement cap

• Well cellar is backfilled

• Area around well, the lease and roads into the lease are then rehabilitated

• Top soil is replaced and recovery of site is monitored until landholder agrees restoration is satisfactory

• End goal is that site is restored to natural state

• Each well abandonment must be approved by the DME and must comply with government regulations

Falcon Shenandoah 1 well design and plug

placement

Permanent isolation and protection of aquifers and groundwater

Santos Operations in the Northern Territory

• Production of oil and gas from Mereenie field in Amadeus Basin

• Gas production to date approx. 250 bcf

• Exploration efforts underway

• Mereenie – tight sandstone / shale

• Sth Amadeus – sandstone

• McArthur – shale

• Highly prospective - multi TCF potential

• Commercialisation routes

• Domestic

• Export through Darwin

• Export through pipeline link to East Coast

Gas Production from Mereenie field, highly prospective exploration in McArthur and Amadeus Basins

|

McArthur Basin -Tanumbirini-1

• Drill date:

• June 2014

• TD ~ 4000m / 75 day well

• Targeting Velkerri & Kyalla shales

• Basin & Play opener

› Testing the most thermally-mature, more gas-prone region of OT Downs Sub-Basin

› Targeting the basin centre for maximum overpressure in mid-Velkerri, and oil to wet gas in Kyalla shales

› Designed to intersect full shale section of ~2,400m thickness, from Top Kyalla Shale to Base Velkerri shale

› Data acquisition is critical, with multiple cores and shale specific logging to understand shale parameters

› Including surface hole information

• To be cased for fracture stimulation in 2015

Unconventional Shale Gas & Oil Exploration

Deep basin centre test, drilling Q3 2014

Tanumbirini 1 location

12 |

Southern Amadeus

• Santos has a significant acreage position in the Southern Amadeus.

• Santos is earning up to 70% equity in these permits via farmin with Central Petroleum

• Initially targeting large conventional target structures in the sub-salt play

• Mt Kitty discovery in April

• Fractures are present which may enhance productivity

• Helium-rich gas may be characteristic of the sub-salt play

• Further evaluation being done

• Working up other leads from regional seismic taken in 2013

Regional significance – Sth Amadeus

13 |

Double Garden Lead

Operations -Interaction with Stakeholders

Traditional Owners

• Engagement with CLC and NLC

Local Employment

• 2013 Seismic surveys provided employment opportunities

• Further opportunities are anticipated on future seismic and drilling operations and associated activities in the Northern Territory

• including engaging local / Indigenous contracting companies where possible and Santos seismic contractor Terrex re-engaging local employees on future seismic campaigns

Pastoralists / landholders

• Southern Amadeus regional seismic survey spanned multiple properties, with landholders approving access for seismic and drilling activities

• McArthur seismic survey also covered multiple properties, with the landholders granting access for both seismic and drilling operations

Establishing successful working relationships with traditional owners, landholders and providing local employment opportunities with exploration operational activity

14 |

Conclusions

Operations

Santos is dedicated to ensuring safe and sustainable operations, including close community engagement, in the ongoing exploration of frontier petroleum plays in Amadeus and McArthur Basins in the Northern Territory

Amadeus Basin

Confidence in our petroleum prospectivity models - all elements are present: charge, structure, seals, potential reservoirs

Next step is to complete the drilling of the Mt Kitty well, and delineate leads and play concepts that have emerged from the 2013 regional seismic for future drilling

McArthur Basin

New seismic has proven the extension of the Beetaloo Sub-Basin eastwards

Prospective Kyalla and Velkerri shales will be targeted with drilling in June

15 |

NT is highly prospective for onshore gas – watch this space!

Insert picture

Thank You

16

GLNG Site on Curtis Island