Santos has been supplying ethane to Qenos and its predecessor companies since 1996 with an original contract to deliver 156 petajoules.

This was extended in 2003 for another 65PJ through to the beginning of 2010.

Under the contract extension, the Santos-led joint venture, which has various oil and gas assets and owns the Moomba gas plant, will supply up to another 56PJ of ethane to Qenos’ Botany plastics and rubber plant in Sydney from late 2007 until the beginning of 2013.

“This extension continues the producers’ longstanding relationship with Qenos for ethane supply, which commenced from the Cooper Basin in 1996,” said Santos managing director John Ellice-Flint.

“It also reaffirms the Moomba plant as an important hub for delivering ethane and sales gas into the eastern and southern Australian markets.”

But with Cooper Basin gas supplies depleting, it is uncertain whether the Santos and its partners Beach Petroleum and Origin Energy would be able to continue supplying ethane after 2013.

The rapidly growing coal seam methane sector cannot make up this shortfall, as CSM has negligible amounts of ethane.

If Moomba is to continue supplying ethane to Qenos for a significant period after 2013, new gas must be discovered in or around the Cooper region.

And even if this happens, this gas may be produced by entities other than the Moomba partners, requiring them to make arrangements to toll other companies’ gas via Moomba and the Moomba-Sydney ethane pipeline.

The Papua New Guinea Gas Project partners and the PNG Government tried to tempt Santos to join the PNG-Queensland gas pipeline project by offering to connect the line to Moomba and to include ethane and other liquids in the pipeline’s gas-stream.

But Santos decided that, even with ethane in the mix, the numbers did not stack up.

A Santos spokesperson said the Moomba partners and Qenos were discussing various alternatives for extending ethane supply.

But the truth is, ethane is a by-product for Santos and the problem is Qenos’ rather than Santos’.

Qenos's Altona, Victoria plant uses ethane from Bass Strait.

If Qenos' Botany plant cannot find more Cooper ethane, it could attempt to obtain ethane from one or more Victorian gas suppliers, it could invest in a naphtha cracking operation or it could relocate its operations to a cheaper gas-rich environment, such as PNG.

The Qenos Botany and Altona plants produce about 500,000 tonnes of ethylene annually, which converts into more than 400,000 tonnes of polyethylene.

The price paid by Qenos to the Moomba partners for the ethane is linked to world oil prices.

Interests in the South Australian Cooper Basin Producers are held by wholly owned subsidiaries of Santos (operator) 66.6%, Beach Petroleum 20.21% and Origin Energy 13.19%.