GLNG considers slowing production to beat low gas prices

GLADSTONE'S liquefied natural gas plants are continuing to respond to low prices as APLNG looks to enter the domestic market and Santos talks at running below capacity.

On Wednesday a new $80 million pipeline was announced to be built in southern Queensland that would allow APLNG to draw gas north to be exported or pumped south to be sold into the domestic market.

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The east coast domestic market has been struggling with a short supply and increased prices, while the international market is dealing with low prices as a result of a glut of supply in Asia.

This pipeline is estimated to create 170 jobs including 20 permanent jobs.

Meanwhile, Santos chief executive Kevin Gallagher said in August that GLNG may run below its 7.8 million tonnes a year capacity.

"(But) we won't be looking to ever mothball one train," he said.

"We will operate both trains potentially at reduced capacity to optimise the production across the facilities. And that'll change with time, from year to year, depending on market conditions, and depending on the annual delivery plan requirements."

PLAN B: GLNG may run below capacity.
PLAN B: GLNG may run below capacity.

Wood Mackenzie head analyst Mr Kanovic said the companies were optimising their potential.

"We see that as a good sign where (Santos) is looking at value rather than volumes," he said.

"Nobody is hurting more than LNG operators themselves. At the end of the day coal seam gas hasn't delivered as LNG companies hoped."

He said if Santos left gas in the ground it would be able to use that mid next decade when prices were higher.

"If they are still producing then they will start to see some returns," he said.

"It is just like any other business which have to respond to market conditions."