The Santos base business comprises production from assets in all of the Company's existing producing fields.  Santos is countering decline from mature fields with strategies such as optimisation and trialling new technologies to maximise output, while running an exploration program which aims to add new projects and production. At all times, ensuring the safety of all operations and minimising any environmental impacts remains paramount. Santos' total production in 2004 fell from 54.2 million boe in 2003 to 47.1 million boe, primarily due to the effects of the 1 January incident at Moomba that resulted in a reduction of 4.6 million  boe, together with declining performance from the East Spar and Stag fields in the Carnarvon Basin, offshore Western Australia. Sales gas and ethane production fell 14% during the year from 222.8 PJ to 190.5 PJ. Production declined in the Cooper Basin and gas production from the onshore Otway Basin ceased with the divestment of these interests. However, gas production was steady or increased in four of five other areas of operation. This illustrates the success of Santos' continued efforts to diversify its base business and to optimise existing production.  Lower Cooper Basin gas production was partly offset  by higher gas production from eastern Queensland through appraisal and development success at Churchie, new interests in Indonesia at Kakap and Brantas Condensate production from the United States was also improved by almost 0.1 million barrels  as successful development and Condensate production increased by 20% from 3.1 million barrels to 3.7 million barrels as Bayu- Undan liquids production commenced with better than expected performance during 2004, offsetting the lower condensate production from the Cooper Basin due to the Moomba incident and decline at East Spar as the field approached the end of its production life.  Cooper Basin oil production declined just 4% during 2004  due to successful delineation, development and production optimisation at several fields, particularly Merrimelia, Derrilyn and Mulberry. Amadeus Basin oil production declines were made less severe through successful drilling at Mereenie. Crude oil production was 13% lower at 9.5 million barrels, down from 10.9 million barrels in the previous year as production declined at Stag, Legendre and Jabiru-Challis. Successful infill drilling at Legendre and Stag helped turn around declines for these fields during the second half of 2004. The program to improve production at Stag will continue into 2005 as simulation studies suggest further drilling and increased water injection could improve future production.  and increased interests at Patricia-Baleen. Amadeus Basin gas production remained flat  as declining production was countered by successful development drilling during  the second half of 2004 at Palm Valley and Mereenie. delineation wells on the deep  Frio trend contributed with improved condensate content during the year. LPG production declined by  34% to 158,600 tonnes in 2004 from 240,700 tonnes in 2003, due mainly to the effects  of the Moomba incident on the production of liquids through the liquids recovery plant. Production from Bayu-Undan was able to only partially offset this decrease. Reservoir studies have identified that some lower permeability reservoirs may have significant potential to increase recoveries through activities such as additional infill drilling, fracture stimulation and waterflooding.  Santos tested new technologies  in the Cooper Basin in drilling, completions and artificial lift optimisation during 2004 to improve product delivery and recovery in order to reduce production costs per unit. To this end, further reductions  in costs for 2005 are targeted  by increasing the focus on  fit for purpose rigs and larger campaigns. These efforts will be supported by a significant boost in 3D seismic acquisition that commenced at the end of 2003 and continues in 2005. Coiled tubing underbalanced drilling operations were performed at three gas wells and one oil well, while multiple pinpoint fracture stimulations were performed at five new gas wells, with between three and six fracs performed in each well.  These introductory programs  are providing encouraging initial results. The underbalanced drilling An increased Gas Sales Agreement was reached with CS Energy which resulted in an additional seven wells being drilled at the Scotia coal seam methane gas field in eastern Queensland. While the Cooper Basin  is a mature hydrocarbon area, Santos is drilling wells which can be commercialised quickly and cost-effectively, delivering strong cash flow which can be applied  to other growth opportunities.  A further focus in 2004 was  to leverage Cooper Basin infrastructure; for example, via gas swaps, and increase prices under existing agreements.  Santos increased gas well deliverability in the Cooper  Basin by 63 TJ per day through numerous projects brought on line during 2004. Some 8 PJ  of incremental gas production resulted during 2004 from this optimisation program. These results were achieved at a significantly lower cost than conventional development drilling and substantially exceeded targets set at the beginning  of the year. These programs will now be extended to a variety of more complex and possibly harsher  oil and gas wellbore/reservoir environments during 2005.  program achieved better than predicted rate improvements  for all three gas wells. APPLYING NEW TECHNOLOGIES  2004 PRODUCTION IMPACTED BY MOOMBA INCIDENT 12 Annual Report 2004 Leveraging Base Business HARNESSING VALUE FR OM OPERATIONS