MALEO NEGOTIATIONS ADVANCED Outside Australia, Santos and  its co-venturers have executed  a Heads of Agreement for the  sale of the entire gas reserves  of the Maleo field offshore East Java, Indonesia. Santos continued negotiations with PT Perusahaan Gas Negara, Indonesia’s state- owned gas distributor, on behalf of the joint venture to finalise the Gas Sales Agreement. The project is targeting first production in the first half of 2006 at rates of up to 100 mmcf/d for more than five years. FIRST RETAIL GAS SALES WITH SANTOS DIRECT LIQUIDS MARKETING  ALLIANCE WITH BP RICK WILKINSON  subsidiary, Santos Direct Pty Ltd (‘Santos Direct’). Santos Direct will market Santos’ 10% share of gas production from the Minerva field – around 15 TJ/d – in the offshore Otway Basin, which commenced production at the end of 2004. The move to market and sell gas directly into the Victorian retail market is a first for Santos and leverages off Santos’ position as one of Australia’s largest gas producers, supplying wholesale gas to major industrial customers and specialist marketers in all mainland Australian states and territories. Another important marketing development during the year was the decision to outsource the marketing of crude oil and natural gas liquids to BP. The new marketing arrangements are in response to the significantly As well as selling gas into the wholesale gas market, Santos secured a retail gas licence from the Victorian Government in 2004. This allows Santos to sell gas direct to industrial customers and into the Victorian spot market through a wholly-owned  Santos continues to build  an inventory of high quality options to provide a platform  for production growth over  the coming years. Santos is committed to a program of diversification while capitalising on the long-term Cooper Basin legacy asset. Most importantly, this involves leveraging  the strengths of the core competencies built up over  a number of years and Santos'  well-positioned domestic  gas franchise. The validity of this approach has already been demonstrated by the sale of the first Mutineer-Exeter oil cargo at a premium to Tapis despite a discount for the uncertain delivery date. higher volumes of crude oil  that Santos will receive from  the Mutineer-Exeter and Oyong projects, coming on stream  in 2005, and the increasing globalisation of the liquids marketplace.  Vice President  Gas Marketing  and Commercialisation Annual Report 2004 21 ‘During 2004 we brought together everyone at Santos responsible for commercialisation into a single team. One of the outcomes from this was the introduction of gas swaps,  where we were able to move  gas between Santos assets in different states.’ The alignment of joint venture interests in the John Brookes and East Spar fields has created an important production hub at Varanus Island, Carnarvon Basin, offshore Western Australia.