Scope Audit opinion Independence The financial report and directors’ responsibility The financial report comprises the statement of financial performance, statem ent of financial position, statement of cash flows, accompanying notes to the financial statements, and the directors’ declaration for both Santos Ltd (the “Company”) and Santos Group (the “Consolidated Entity”), for the year ended 31 December 2004. The Consolidated Entity comprises both th Company and the entities it controlled during that year. The Directors of the Company are responsible for the preparation and true an d fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of ad equate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accoun ting estimates inherent in the financial report. We conducted an independent audit in order to express an opinion to the m embers of the Company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement,  selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an au dit cannot guarantee that all material misstatements have been detected. We performed procedures to assess whether in all material respects the financi al report presents fairly, in accordance with the Corporations Act 2001, Australian Accounting Standards and other mandatory financial reporting r equirements in Australia, a view which is consistent with our understanding of the Company’s and the Consolidated Entity’s financial position, and of th eir performance as represented by the results of their operations and cash flows. We formed our audit opinion on the basis of these procedures, which included: While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal contr ols. In conducting our audit, we followed applicable independence requirements of  Australian professional ethical pronouncements and the Corporations Act 2001. In our opinion, the financial report of Santos Ltd is in accordance with: (a) the Corporations Act 2001, including: (b) other mandatory professional reporting requirements in Australia. (i) giving a true and fair view of the Company’s and the Consolidated En tity’s financial position as at 31 December 2004 and of their performance for the financial year ended on that date; and (ii) complying with Accounting Standards in Australia and the Corporation s Regulations 2001; and • examining, on a test basis, information to provide evidence supporting th e amounts and disclosures in the financial report, and • assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the Directors. Audit approach KPMG Peter A Jovic Partner Adelaide 23 February 2005 Annual Report 2004 89 INDEPENDENT AUDIT REPORT T O MEMBERS OF SANTOS LTD