ACHIEVING INNOVATIVE COMMERCIALISATION On top of exploration and new ventures growth opportunities, Santos has a large inventory of gas fields that are yet to be committed to gas contracts. These fields, known as contingent resources, represent significant opportunities for Santos.  Each year Santos works towards commercialising these fields by finding new gas contracts or extending existing contracts  so that they can be booked as Proven (1P) or Proven plus Probable (2P) reserves. Santos’ contingent gas resources are largely located offshore southern Australia and Western Australia, in the Bonaparte Basin offshore northern Australia and onshore Papua New Guinea.  Santos continued to deliver on gas commercialisation during 2004, commercialising 27 million boe during the year. Santos also achieved positive contract price reviews for gas sales that were well above the indexed levels. Some of the most important gas commercialisation achievements for the year were the innovative gas swaps agreements that were only possible because of Santos’ unique spread of assets across key Australian gas hubs. Santos and the other South  West Queensland Gas Producers announced a coal seam methane gas swap in May to allow each party to supply the other party’s contractual obligations in different states via the Moomba gas hub in central Australia. This arrangement for 200 PJ meant that Origin could avoid building  a pipeline and that Santos could capture a share of the saving. Santos and its co-venturer Apache won two significant gas contracts in Western Australia The Casino contracts are unique in that the reserves have been contracted prior to the field being fully appraised to confirm the quantity of gas available. This  has allowed the joint venture  to undertake appraisal drilling and near field exploration programs with the knowledge  that all of the gas likely to be discovered will be taken, thereby significantly reducing the risk. This shortens the time from discovery to production and delivers profits to Santos and  its shareholders sooner. When the project was sanctioned in October 2004, the joint venture announced an extension to the original Gas Sales Agreement to supply up to 420 PJ of gas, and possibly another 105 PJ, over 12 years for the Victorian or South Australian markets. The commercialisation of the Casino gas field in the Otway Basin, offshore southern Australia, continued during 2004 with an increase in the quantity of gas being sold under the initial term sheet signed in September 2003 with TXU for 293 PJ.  A second gas swap, from eastern Queensland to Gippsland, moved gas through three states and five joint ventures, expanding market horizons for partners and providing backup options  to customers. Gas swapping will commence in 2005 and could continue until the end of 2011. ENERGY HUB STRATEGY Wickham Point LNG Hub Varanus/Barrow Island Hub Wallumbilla/Scotia Hub Moomba/Ballera Hub Minerva/Casino Tiebacks Orbost Hub Pipeline EXPANDED CASINO CONTRACT ENHANCES VALUE UNIQUE ENERGY HUBS DELIVER GAS SWAPS WA CONTRACTS FAST-TRACK JOHN BROOKES Annual Report 2004 20 which resulted in the fast tracking and sanctioning of the John Brookes gas field in the Carnarvon Basin. The successful appraisal of the field in late 2003 and early 2004 significantly increased the available gas reserves. The decision to bring the field into production by mid-2005 enabled active marketing of gas above that already allocated to support the declining East Spar field.  In a separate move, designed to enhance future commercialisation opportunities, the joint venture equity interests in the East Spar and the John Brookes fields were aligned through an acquisition program which created an important production hub  at Varanus Island. John Brookes has an expected field life of more than 15 years which could be further extended by a development of the Reindeer field in later years. The gas will be converted to LNG at a new facility to be built at Karratha. The LNG will then be transported by road tankers to fuel the gas-fired power stations in Broome, Derby, Fitzroy Crossing and Halls Creek. The contract will commence in the first half  of 2006. The second John Brookes contract is to supply 58 PJ of gas over 20 years to EDL to supply four gas- fired powered stations under construction as part of its West Kimberly Power project in Western Australia. In the first contract, the joint venture agreed to supply Newcrest Mining with 120 PJ of gas over 15 years at a maximum rate of 25 TJ per day. Newcrest will use the gas for power generation at the Telfer gold  mine in the Pilbara region of Western Australia.