Australia’s Santos has taken a final investment decision for its $3.6 billion Barossa project to secure feed gas for the Darwin LNG plant in the Northern Territory.
Santos claims the project represents the biggest investment in Australia’s oil and gas sector since 2012.
Barossa FID also kick-starts the $600 million investment in the Darwin LNG life extension and pipeline tie-in projects, which will extend the facility life for around 20 years, Santos said on Tuesday.
The Santos-operated Darwin LNG plant has the capacity to produce about 3.7 million tonnes of LNG per annum.
Santos chief executive Kevin Gallagher said the decision was consistent with Santos’ strategy for disciplined growth utilising existing infrastructure around the company’s core assets.
“Our strategy to grow around our five core asset hubs has not changed since 2016. As we enter this next growth phase, we will remain disciplined in managing our major project costs, consistent with our low-cost operating model,” Gallagher said.
“As the economy re-emerges from the Covid-19 lockdowns, these job-creating and sustaining projects are critical for Australia, also unlocking new business opportunities and export income for the nation. The Barossa and Darwin life extension projects are good for the economy and good for local jobs and business opportunities in the Northern Territory,” he said.
Barossa and Darwin LNG life extension to create 600 jobs
According to Gallagher, Barossa and Darwin LNG life extension would create 600 jobs throughout the construction phase and secure 350 jobs for the next 20 years of production at the LNG facility.
Barossa FID is the final condition required for completion of the 25 percent equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S, which is also a partner in Barossa.
Santos expects completion of the SK transaction at the end of April and result in net funds to Santos of about $200 million.
“I am delighted to welcome our Barossa joint venture partner SK E&S as a partner in Bayu-Undan and Darwin LNG and appreciate their support for today’s Barossa development decision,” he said.
The Barossa development will comprise 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.
To remind, Santos said last week it had awarded the FPSO contract to BW Offshore.
The firm targets first gas production in the first half of 2025.
Moreover, 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 has also signed a memorandum of understanding with SK E&S and Mitsubishi to jointly investigate opportunities for carbon-neutral LNG from Barossa.
This includes 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,” Gallagher said.
In addition, Santos and JERA continue to progress the binding sale and purchase agreement for a 12.5 percent 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 percent, and in the Barossa project to 50 percent.