PERTH (miningweekly.com) – Energy major Santos has signed a 20-year gas purchase agreement with the Meridian SeamGas joint venture (JV) for supply to the Gladstone liquefied natural gas (GLNG) project.

The agreement would start in 2015, while the gas price would be oil-linked from 2016.

The gas would be supplied from the Meridian gasfield in Queensland, and delivered to the GLNG gas transmission pipeline, which passes adjacent to the fields. The agreement provided for a future sales volume of up to 65 TJ a day.

The Meridian fields are a joint venture (JV) between ASX-listed WestSide Corporation and Mitsui E&P Australia. The fields have a current installed compression capacity of 30 TJ of gas a day.

WestSide MD Mike Hughes said that the JV partners intended to significantly increase production from the field’s existing level of around 12 TJ/d to supply the GLNG project over the contract period.

“There is no doubt that this contract is a company-maker which will transform WestSide into a significant gas producer.”

He noted that a conservative development plan could see the Meridian JV supply 40 TJ/d by 2017, in which case WestSide’s share of revenues over the contract term could significantly exceed A$1-billion.”

Stepping up production to this level over three years would require a A$40-million financing package, but Hughes said that capital spending could be varied according to the availability of funding.

Expansion to 65 TJ/d and beyond would also require further investment.

Santos VP for downstream operations at GLNG Rod Duke said on Wednesday that the GLNG project was approaching 80% completion and remained on schedule for first LNG in 2015.

He noted that the agreement with the Meridian JV built on the project’s existing diverse gas supply portfolio, which included gas from the GLNG acreage, underground storage, supply from Santos’ portfolio as well as other third party suppliers.

The $18.5-billion GLNG project is 30% held by Santos, with Petronas and Total each owning a 27.5% interest and Kogas the remaining 15%.