At the company's annual investor presentation in Sydney yesterday Ellice-Flint said while oil and liquids production would decline by about one million barrels of oil to 53 million in 2004 output will rise 70% between 2003 and 2006.

"Unfortunately Santos, like many companies, cut exploration and development spending when oil prices bottomed in 1998," he said.

However Santos, which supplies about two-thirds of Australia's gas, had at least five projects that would drive growth from 2004-07, such as the massive Bayu-Undan project in the Timor Sea and Western Australia's Mutineer/Exeter project.

Ellice-Flint did concede that oil production beyond the Mutineer/Exeter production would depend on exploration success, although the company's ageing Cooper Basin fields would be the focus of some new investment.

Gas production, although likely to dip next year, is also facing a production surge: "We have a growing production profile. Two years ago we only had one major project on the drawing board. Now we have four or five with others on the conveyor belt," said Ellice-Flint.

Ellice-Flint also said he expected oil prices to remain strong for some time as Chinese imports surged and access to the scarce resource becomes tighter. The emergence of a global gas market could also see domestic prices converging towards re-gasified LNG prices.

In early trading Santos stock was 28 cents higher at $6.49.