FIRST liquefied natural gas from the Santos-run Gladstone LNG project will be produced at around the end of the third quarter this year, as production rose and revenue fell in the March quarter.

Sales revenue for the first quarter was $825 million, down $88 million or 10 per cent on the $913 million recorded in the first quarter of 2014 – a fall Santos managing director David Knox attributed to the fall in global oil prices, despite stronger gas prices and a weaker Australian dollar.

“First quarter capital expenditure was 40% lower than last year and we continue to make solid inroads towards reducing production costs per barrel across the business,” he said.

The news came as Santos announced a total first quarter production of 14 million barrels of oil equivalent (MMboe) and sales volumes of 15.2 MMboe – up 15% and 10% on the first quarter of 2014 – reflecting in part Santos’s share of production from the Papua New Guinea LNG project.

The rise in production came despite a 22% fall in quarterly crude oil production due to scheduled dry dock maintenance of the Mutineer-Exeter and Fletcher Finucane floating production, storage and offloading vessel during the first quarter.

Nonetheless, Santos has maintained its guidance of an annual production rate of between 57 MMboe and 64 MMboe for 2015.

Work on the GLNG project was 95% complete, Santos said in an April announcement, with construction on the major gas field processing facilities and its 420 kilometre pipeline completed.

Mr Knox said the delivery of the GLNG project would position the company well as a key player in the growing Asian gas market.

“We have made significant progress on the ground in both 2014 and in the first quarter of this year,” he said.

A total of 16 wells were drilled in the GLNG acreage during the first quarter, 15 of those development wells in Roma, while another 39 wells were completed as producers, the company said in its first quarter activities announcement.

During the quarter, the last of the 71 Fairview Eastern Flank Phase 1 wells were completed and the connection program is well advanced.

Piping and cabling is nearing completion of Trains 1 and 2 at the GLNG facility, with work on both LNG tanks also soon to be concluded.

Santos said the entire GLNG project had an estimated gross capital cost of US$18.5 billion from the final investment decision to the end of 2015, when the second train is expected to be ready for start-up.