Santos in preparation mode ahead of sell-off of infrastructure assets

Will Santos follow Shell with an infrastructure sell-off? Picture: Kelly Barnes

The $US2.5bn ($3.3bn) sale of infrastructure by Shell at its Queensland LNG plant this week has prompted some to wonder whether a similar move by oil and gas company Santos will follow.

Santos has a $13.6bn market value. At its investor day in December, managing director Kevin Gallagher outlined plans to separate the infrastructure from its oil and gas assets in its accounts and attribute about $400m worth of annual revenue to those assets.

He told investors Santos would not rush into any sale of assets, but the preparations would offer the company the option further down the track.

Santos is in preparation mode in terms of packaging up its infrastructure assets and some say a sale could be 12-24 months away.

Santos hired Goldman Sachs around 2015 to consider a sale of the Gladstone LNG pipeline in Queensland. Santos owns 30 per cent of the pipeline, with the rest held by France’s Total, Malaysia’s Petronas and Korea’s Kogas. However, all the parties were not in agreement about a sale.

A year earlier, Goldmans helped British Gas sell its rival pipeline for $US5bn to APA.

Any deal in which Santos offloaded its infrastructure assets would probably involve the oil and gas group retaining a minority stake.

The value of assets depends on the tolling agreement that Santos strikes with any buyer.

Low-risk infrastructure assets remain in strong demand as major global funds search for secure-yielding investments.

Meanwhile, the $US2.5bn that Global Infrastructure Partners agreed to pay for a 26.25 per cent stake in QCLNG infrastructure this week was in line with predictions.

GIP will own a stake in Shell’s LNG storage tanks, jetties and operations infrastructure that services QCLNG’s two gas export trains at Queensland’s Curtis Island. Shell moved to embark on the sale through Rothschild as part of its strategy to offload non-core assets to simplify its portfolio.

Shell, which supplies 16 per cent of east coast gas demand, owns 73.75 per cent of QCLNG with China’s CNOOC holding a 25 per cent stake and Tokyo Gas the remaining 1.25 per cent.