Santos (ASX:STO) and Brickworks (ASX:BKW) extend gas supply deal for 11 years

Highlights:

• Santos has agreed binding terms to extend gas supply agreement with Brickworks for additional 11 years.
• The agreement covers the east coast operations of Brickworks.
• Under the contract, around 35 petajoules of natural gas will be supplied to Brickworks.

Australian energy company Santos Limited (ASX:STO) on Tuesday (29 November 2022) shared via an ASX filing that the existing wholesale gas sale agreement with Brickworks Limited (ASX:BKW) has been extended for another 11 years under binding terms. The new agreement will commence from January 2025 and has the potential to extend it further.

Brickworks is a materials company which is engaged in building products, investments and land and development.

Details of the extended gas supply agreement

The agreement offers the security of gas supply to Brickworks’ east coast operations and will support Santos’ investment in gas supply in the east coast market.

Kevin Gallagher, chief executive officer and managing director, Santos, stated that under the agreement, the company would supply around 35 petajoules of natural gas at stable, competitive, CPI-linked prices to Brickworks.

Gallagher said,

Gallagher stated that Brickworks and Santos share an ambition of decarbonisation and intend to work together to explore net-zero energy transition opportunities, such as carbon storage and capture and post-combustion capture.

What else?

Today, Santos informed the market about the temporary shutdown of the John Brookes platform. Considering the existing situation, the company expects that repair can take around four to six weeks to allow the platform to return to full production.

According to ASX announcement, a small gas leak was identified during the routine activities on the un-staffed facility. After the observation of the leak, the pipeline and the platform were depressurised and shut down on an immediate basis, and all personnel were demobilised, said Santos.

As reported, all the relevant regulatory bodies have been informed about the event, and the company is working with its customers to manage the gas supply arrangements until the repair work is completed.

Varanus Island will continue production at a lesser rate. Also, Santos said that no changes are expected in its production market guidance.

Share performance of Santos and Brickworks

Santos shares were spotted trading 1.10% lower at AU$7.17 per share at 11:42 AM AEDT with a market capitalisation of AU$24.13 billion. Brickworks’ share price surged by 1.69% to AU$22.91 apiece around the same time, with a market capitalisation of AU$3.43 billion.