, the Australian oil and gas producer, has been forced to write down $1.1bn after tax from the value of a liquefied natural gas project in Queensland after it failed to produce as much gas as expected in the first half of the year.

The project, called Gladstone LNG, involves pumping gas from coal seams in basins in south-west Queensland, before liquefying it and shipping it around the world.

The pipeline has not delivered as much as expected in 2016, however, leaving having to buy in gas from elsewhere, the price of which has increased during the first half of the year.

Continuing low oil prices have limited the amount of capital spending the company has been able to invest in projects such as Gladstone LNG. The price of a barrel of crude oil is currently around $47, having been $115 two years ago.

Peter Coates, Santos’ chairman, said: “The expected impairment charge for GLNG is clearly disappointing but it is a consequence of the challenging environment which we now face.”

He added: “However, we firmly believe in the strong long-term growth of LNG consumption and demand globally. GLNG will continue to be an important part of our LNG portfolio and a key supplier of LNG to the Asian market.”

The company was expected to announce a net loss of around $100m on Friday when it reveals results for the first six months of the year. The writedown on the LNG project is now expected to substantially deepen that loss.

Kevin Gallagher, chief executive, said: “We will continue to maintain a disciplined approach to capital allocation, reducing costs and seek opportunities to optimise our asset portfolio in a manner that delivers value to shareholders.”

The company’s shares rose 1 per cent on Monday to A$4.78. They have fallen from their most recent peak of around A$14 in summer 2014.

Analysts at RBC said: “We remain concerned that cost cutting, chiefly on development drilling for volumes already committed, may eventually catch up with the company.”