By Rebekah Kebede
PERTH, July 4 (Reuters) - Australia's Santos Ltd and BG Group PLC agreed on Thursday to link their majorgas pipelines, allowing them to buy, sell, and swap gas supplies- a move that will help slash costs at a time when they havebeen hit by budget overruns.
The long-awaited first step toward collaboration betweenthree coal seam gas to LNG projects under construction onAustralia's seaboard should result in savings of hundreds ofmillions of dollars, according to Santos.
The connection between the two projects' pipelines will alsoallow upstream gas field operations to continue when theirliquefied natural gas plants are shut for routine maintenance.
"We're spending less than $50 million on this, but we thinkit will generate savings over the long term of many times that,"Rod Duke, Santos vice president of Gladstone LNG Downstream,told Reuters.
"We expect that this will be just one of many mutuallybeneficial arrangements across the industry in the future," Dukesaid.
Santos, BG, and Origin Energy are leading theconstruction of three separate coal seam gas to LNG projects onQueensland's Curtis Island at a total cost of more than A$60billion ($54 billion) but have been criticized for failing tocollaborate and save costs.
Santos' Gladstone LNG project has seen its costs jump around15 percent from $16 billion to $18.5 billion, while BG'sQueensland Curtis Island LNG has seen a 36 percent blowout to$20.4 billion from $15 billion, mostly due to a strongAustralian dollar.
There may also be collaboration with Arrow LNG, a fourthcoal seam gas to LNG project that is a joint venture betweenRoyal Dutch Shell and PetroChina ,although the project appears to have stalled.
This year, Origin Energy offered Arrow the opportunity towork together on the expansion of its A$24.7 billion plant underconstruction on Curtis Island.
