Santos Seals Deal With Mitsubishi for Barossa’s LNG

The agreement takes 80% of Santos’ share of expected gas from Barossa annually for 10 years.


Ahead of making a final investment decision (FID) to proceed with Barossa, Santos has committed to sell 1.5 million tons per year (mtpa) of liquefied natural gas (LNG)—80% of Santos’ share of expected gas from the $5-billion project—to Mitsubishi’s Diamond Gas International (DGI).

The 10-year supply-and-purchase agreement (SPA) is a step toward Santos’ target of reaching an FID by June 2021 for the delayed Barossa project in the Timor Sea, which was put on hold after the oil price collapsed in March. Santos advised its investors in early December that a deal had been struck on the terms for processing Barossa gas at Darwin LNG, the other major hurdle.

The SPA represents more than 80% of Santos’ equity LNG volume based on holding a 50% stake in Barossa, following sale of a 12.5% stake to major Japanese LNG importer JERA. It also has plans to sell a stake in Darwin LNG to existing Barossa partner SK Group.

“The deal provides portfolio balance to our existing oil-linked LNG offtake agreements from GLNG and PNG LNG,” Santos Managing Director Kevin Gallagher said. “It also represents the first Santos long-term equity LNG sale from one of our major LNG projects, demonstrating our marketing capability to meet customer needs in the market.”

The development of the Barossa field, about 300 km north of Darwin, Australia, will provide a new source of gas supply for Darwin LNG, whose existing feed from the Bayu-Undan field is drying up. The life of the Darwin plant, now managed by Santos since it bought ConocoPhillips’ northern Australian assets last year, will be extended to 2050.

CCS Opportunities for Barossa LNG

In addition to the long-term SPA, Santos and Mitsubishi have signed a memorandum of understanding (MOU) to jointly investigate opportunities for carbon-neutral LNG from Barossa, utilizing the producer’s proposed carbon capture and storage (CCS) project at Moomba in South Australia.

The Moomba project is FID-ready and will have the capacity to store 1.7 mtpa of CO2 deep underground in depleted natural-gas reservoirs.