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Santos eases Australia gas supply fears in power plant deal

[MELBOURNE] Australia's Santos Ltd said on Monday it has agreed to supply gas to a power plant in South Australia, easing concerns about local gas and power shortages as it looks to avert government limits on its liquefied natural gas (LNG) exports.

The government is yet to decide whether to restrict LNG exports from any of Australia's three east coast LNG plants from January onwards, and will take a decision if it determines there will be a shortfall of domestic gas supply.

Santos's Gladstone LNG plant is considered the most vulnerable to export curbs as it has been taking gas out of the domestic market to help meet LNG contracts.

To help avoid restrictions, Santos said on Monday it would provide 15 petajoules of gas to the Pelican Point power station, owned by France's Engie, starting January next year.

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Engie said the deal would help cover a large portion of Pelican Point's gas requirements over the near term. Neither company said for how long.

Some of the gas will come from its Gladstone LNG project, Santos said, after lining up support from its partners Malaysia's Petronas, France's Total and Korea Gas Corp. Petronas and KOGAS are also GLNG's main customers.

Gas supply is crucial for Pelican Point, following Engie's decision to restart the second of the two plant units after a string of blackouts in wind-dependent South Australia in the past one year.

Australia's energy market operator had warned that without Pelican Point running at full tilt, South Australia could face blackouts in the 2017-18 summer, following Engie's closure of one of the market's biggest coal-fired plants last March.