Set to step on the gas after years of decline

After a decade of decline and then modest rises over the past three years, Santos has signalled a hike in gas production capacity in the Cooper Basin in central Australia, with a 30 per cent surge expected over the next two years.

The forecast by the company, which has a major position in the basin, comes as gas producers are warning of significant rises in gas prices over the next three years amid rising competition from export projects being developed in Queensland.

Santos said capacity at its operations in the Cooper Basin had risen for the past three years after bottoming at 400 million cubic feet a day. At the same time, oil production has also risen to three-year highs.

Gas production capacity is now expected to rise 30 per cent to about 550 million cubic feet a day by 2015, it told a conference in Brisbane on Tuesday.

The move comes against the backdrop of rising demand for gas from the export projects being developed in Queensland and as Santos and its partners prepare to access a greater portion of so-called unconventional gas, which in the Cooper will be from shale.

Already Santos has had strong initial flows from unconventional gas wells in the region.

The company is also working to reduce "down time", when its wells are not producing, as well as working to cut production costs to below $10 a barrel of oil equivalent.

It is also aiming to more than double the number of wells drilled annually in the Cooper from the present level of about 25.