Santos approves Northern Territory’s $4.7 billion Barossa gas project
SANTOS has approved its $4.7 billion Barossa gas project in the Northern Territory with the energy giant giving the go-ahead for a final investment decision this morning
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SANTOS has approved its $4.7bn Barossa gas project in the Northern Territory, with production ensuring the Darwin LNG plant remains running as supplies from old fields run out.
The energy major on Tuesday gave the go-ahead for a final investment decision on Barossa with initial gas targeted by the first half of 2025, sources said.
The move will also trigger a flurry of equity selldowns, as Santos brings in a new partner on Barossa and sells stakes in Darwin LNG and Bayu-Undan, the field which current feeds Australia’s second-oldest LNG plant.
A decision on Barossa was delayed just over a year ago after Santos was forced to slash spending after describing the plunge in oil prices and rout in markets from coronavirus as a “one-in-100-year event”.
The Barossa gas field, 300km north of Darwin, was due to be signed off by June 2020 but was forced on the backburner with $US350m of Santos’ spending cut due to “rephasing” investment in Barossa and PNG LNG.
The move to proceed will mark the first major gas project sign-off this year with projects pending including Woodside Petroleum‘s $16bn Scarborough gas project in Western Australia. Santos declined to comment.
Santos gained control of both Barossa and Darwin LNG after snapping up ConocoPhillips’ northern Australia business for $2bn in October 2019, cementing its LNG exposure in addition to stakes it holds in Queensland’s GLNG project and ExxonMobil’s PNG LNG plant in Papua New Guinea.
Chief executive Kevin Gallagher awarded the biggest contract on Barossa - the floating production, storage and offloading vessel deal - to BW Offshore on March 24, noting the deal achieved capital cost savings of $US1bn.
Mr Gallagher is also among potential successors to Woodside chief executive Peter Coleman, according to sources.
The Bayu-Undan fields, offshore in Timor-Leste waters and currently feeding the Darwin plant, are expected to run out of gas by the end of 2023.
According to broker RBC, that is likely to mean that Darwin LNG is out of action for up to 18 months, ratcheting up pressure to sanction Barossa so the LNG plant can eventually resume shipping 3.7m tonnes a year of gas to buyers in Asia in 2025.
Santos is in the process of selling 12.5 per cent of its 62.5 per cent stake in Barossa to Japanese gas buyer JERA with South Korean firm SK E&S owning the 37.5 per cent balance.
The Barossa final investment decision will also trigger SK buying a 25 per cent share of both Darwin LNG and Bayu-Undan with Santos owning 43.4 per cent and the rest split between Inpex at 11.4 per cent, Eni at 11 per cent along with JERA and Tokyo Gas.
RBC said the reduction in capital spending and relatively high gas liquids content made Barossa the lowest cost new Australasian LNG supply at $US5.50 per million British thermal units.
Australia’s LNG exports are expected to fall by 31 per cent to $33bn in 2020-21 as the oil price plunge pressures contract prices before recovering to $45bn by 2025-26.
Originally published as Santos approves Northern Territory’s $4.7 billion Barossa gas project
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