Santos will proceed with the $3.6-billion development of the Barossa field offshore the Northern Territory. The project’s final investment decision (FID) kick-starts the $600-million investment in the Darwin LNG life extension and pipeline tie-in projects, which are expected to add about 20 years of life to the facility. The Santos-operated Darwin LNG plant has the capacity to produce approximately 3.7 mtpa of LNG.
The Barossa project represents the biggest investment in Australia’s oil and gas sector since 2012 and comprises a floating production, storage, and offloading (FPSO) vessel, subsea production wells, supporting subsea infrastructure, and a gas export pipeline tied into the existing Bayu-Undan-to-Darwin LNG pipeline. BW Offshore was recently awarded the contract to supply the newbuild FPSO. First gas production is targeted for the first half of 2025.
“Our strategy to grow around our five core asset hubs has not changed since 2016,” said Kevin Gallagher, Santos managing director and chief executive. “As we enter this next growth phase, we will remain disciplined in managing our major project costs, consistent with our low-cost operating model. Barossa and Darwin LNG life extension will create 600 jobs throughout the construction phase and secure 350 jobs for the next 20 years of production at the Darwin LNG facility.”
At the end of last year, Santos finalized tolling arrangements for Barossa gas to be processed through Darwin LNG and it had signed a long-term LNG sales agreement with Diamond Gas International, a wholly owned subsidiary of Mitsubishi Corporation, for 1.5 mtpa of Santos-equity LNG for 10 years with extension options.
Santos has also signed Memoranda of Understanding with SK E&S and Mitsubishi to jointly investigate opportunities for carbon-neutral LNG from Barossa, including collaboration relating to Santos’ Moomba CCS project, bilateral agreements for carbon credits, and potential future development of zero-emissions hydrogen.
“We will continue to explore the potential for carbon-neutral LNG from Barossa as part of our commitment to lower global emissions and as a company, reach our net-zero emissions target by 2040,” added Gallagher.
The Barossa FID is the final condition required for completion of the 25% equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S, which is also a partner in Barossa. Completion of the SK transaction is expected to occur at the end of April and result in net funds to Santos of $200 million, being the sale price of $390 million less the forecast cash flows from the 25% interests from the effective date of 1 October 2019 to completion.
Santos and JERA continue to progress the binding sale and purchase agreement for JERA to acquire a 12.5 % interest in Barossa.
Completion of the sell-downs to SK E&S and JERA will see Santos’ interests in Bayu-Undan and Darwin LNG change to 43.4%, and in the Barossa project to 50%.
