Australia’s Santos said it has awarded a major contract to BW Offshore for its Barossa LNG project as it looks to make a final investment decision “in the coming weeks”.
Santos is developing the Barossa gas field offshore northern Australia to secure feed gas for the Darwin LNG plant.
The new contract to BW Offshore includes construction, connection and operation of the project’s floating production, storage and offloading vessel (FPSO).
The large FPSO will have a processing capacity for up to 800 million standard cubic feet per day of gas and design capacity of 11,000 barrels per day of stabilised condensate.
Subject to FID, the FPSO services contract represents the “largest capital expenditure component” of the $3.6 billion Barossa offshore gas and condensate project to backfill Darwin LNG, Santos said.
The contract contains an upfront pre-payment and an option to buyout, and achieves an overall reduction of about $1 billion in capital expenditure, according to the firm.
Santos chief executive Kevin Gallagher said through “extensive and intensive” contract review processes, the company had achieved a “significant” financial saving as well as “significant” energy efficiency improvements.
“The decision to proceed with an FPSO services contract maintains a low ongoing operating cost while engineering enhancements have significantly reduced the project’s carbon footprint,” Gallagher said.
“This reduction in capital expenditure makes Barossa one of the lowest cost of supply projects in the world for LNG and will provide new supply into a tightening LNG market,” he said.
The FPSO will be built in South Korea and Singapore before being towed and permanently located in the field where it will process natural gas prior to its transport via pipeline to Darwin LNG.
The FPSO will also store condensate for periodic offloading.
Santos plans to take FID soon
Barossa will provide the next source of gas for the existing Santos-operated Darwin LNG plant once current reserves from its Bayu-Undan field in the Timor Sea have been depleted.
Gallagher said the awarding of this contract builds on the momentum of the Barossa project over the past six months and marks the “final milestone” ahead of FID.
Santos said in December it signed a long-term supply deal with a unit of Japan’s Mitsubishi Corporation to supply LNG from its Barossa project.
Mitsubishi would buy 1.5 million tonnes per annum of Santos equity LNG but the company also executed agreements to transport and process Barossa gas through the Darwin LNG facilities.
Santos said on Wednesday it aims to take FID on the Barossa project “in the coming weeks” as it targets first gas in the first half of 2025.
The Australian LNG firm currently holds a 62.5 percent operated interest in the Barossa joint venture along with partner SK E&S that has 37.5 percent share.
It is also finalising an agreement to sell a 12.5 percent interest in Barossa to Darwin LNG partner JERA and has a binding agreement to sell 25 percent interests in Bayu-Undan and Darwin LNG to SK E&S.