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MELBOURNE, Nov 25 AAP

November 25 2012, 12:00AM

Oil and gas producer Santos says project costs in Australia are extremely high and it is critical they come down.

"Costs in Australia are extremely high, and it is a concern to both oil and gas companies," Santos chief executive David Knox told the ABC's Inside Business program on Sunday.

"I know it's also a concern for minister Ferguson (Resources and Energy Minister Martin Ferguson) about these costs.

"We are going to have to bring our cost base down and that's the critical thing that we are all committed to working on."

Mr Knox urged company chief executive officers (CEOs) to co-operate in searching for ways to lower costs.

"We have to get good at collaborating, and I think what you'll see in the future is a much more open conversation around how we are going to collaborate.

"There's not a CEO in Australia that doesn't recognise that we need to get our costs down and really manage them."

Mr Knox said the business sector and government also needed to work together with a view to easing the burden of regulation, some of which cost business a lot of money without delivering much benefit.

Mr Knox said that at Santos, drilling costs had been reduced by the introduction of new technology on rigs.

The company was also reducing costs by sharing services, such as medical evacuation helicopters.

Mr Knox said one of the reasons costs had risen was that so many projects had been started at the same time, which had created competition for inputs.