Santos, GDF Team Up to Develop Floating LNG Project
- Santos to sell a 60% interest in the Petrel, Tern and Frigate gas fields in the Bonaparte Basin to GDF SUEZ for US $200 millionGDF SUEZ to lead the development of Bonaparte LNG, a proposed 2mtpa floating LNG project, and the marketing of the LNG
- GDF SUEZ to carry Santos’ share of pre-FEED and FEED costs and make an additional payment of US$170 million upon FID of the project
- Transaction monetizes 220 mmboe of Santos' contingent resources whilst preserving significant upside via its remaining stake in the project
- Enables GDF SUEZ to enter the Pacific Basin market as an integrated LNG player
Santos and GDF SUEZ have announced a milestone partnership to develop a floating LNG project in the Bonaparte Basin, Australia (Bonaparte LNG).
Bonaparte LNG aligns the interests of both companies across the full value chain, from gas field resources to plant development and downstream.
GDF SUEZ and Santos will form a 60/40 unincorporated joint venture to be led by GDF SUEZ to:
- Develop and operate a proposed floating liquefaction plant with a planned capacity of 2mtpa of LNG which will utilize the gas from the Petrel, Tern and Frigate natural gas fields and;
- GDF SUEZ to lift all the LNG production and to ship it to markets in the Asia-Pacific region in accordance with terms agreed by the joint venture.
- As part of the project, Santos has agreed to sell a 60% interest in the Petrel, Tern and Frigate offshore gas fields to GDF SUEZ who will become operator in 2011. These fields are located in the Timor/Bonaparte Basin, one of Australia's most significant gas provinces and an active region for LNG developments.
The joint venture combines Santos' upstream expertise and GDF SUEZ' technical leadership in floating LNG.
For Santos, the transaction amounts to a total consideration of up to US $370 million for contingent resources structured as follows:
- A cash consideration of US $200 million;
- A contingent consideration of US $170 million to be paid upon Final Investment Decision (FID) to develop the assets.
GDF SUEZ will also fully carry Santos' share of pre-FEED and FEED development costs for the floating LNG project and Santos' share of the upstream pre-FEED and FEED development costs for the Petrel, Tern and Frigate offshore gas fields, which includes two appraisal wells. Santos will also retain significant upside value from its 40% interest in the Bonaparte LNG project.
Bonaparte LNG is a significant outcome arising from Santos' ongoing review of commercialization options for its substantial gas assets in the Bonaparte Basin and represents the asset monetization process announced in Santos' equity raising ASX release of May 11, 2009. The transaction covers approximately 30% of Santos' total Bonaparte Basin contingent resources (comprising the Petrel, Tern, Frigate, Evans Shoal, Barossa and Caldita gas fields). Based on the US $200 million upfront payment, Santos will book a profit on sale of approximately A$160 million after tax in the second half of 2009.
Bonaparte LNG will provide GDF SUEZ a major opportunity to increase its footprint within the upstream and liquefaction sectors of the Asia Pacific market, a premium market sector accounting for two thirds of global LNG demand. The project also serves the Group's integration objective of driving the development of integrated LNG chains. In this case, E&P and LNG activities work in synergy to develop new LNG resources on a worldwide scale.
Bonaparte LNG enables GDF SUEZ to capitalise on the considerable design and engineering work already committed by the Group on floating LNG terminals, both in terms of LNG liquefaction and regasification, by leveraging in-house R&D and international partnerships.
The project will give GDF SUEZ its very first foothold in the Australian exploration-production sector. The fields represent a significant growth driver for the Group, creating the potential to increase its resources by 20%. It will also enable the Group to extend its LNG supply portfolio (Latin America, Europe, Africa and the Middle East) to the Asia Pacific region.
Santos Chief Executive Officer David Knox said, "In GDF SUEZ, we have chosen a leader in the gas and LNG industry and a company with the technical capacity to develop a floating LNG project as our partner. We are very pleased to achieve a transaction which delivers US $200 million upfront cash, unlocks 220 mmboe of contingent resource and adds to our growing portfolio of LNG growth projects."
"Further optionality exists in Santos' other Bonaparte Basin assets, namely the Evans Shoal, Barossa and Caldita fields. We will now consider commercialisation options for these assets," Mr Knox said.
GDF SUEZ Chairman and CEO Gérard Mestrallet declared, "We are delighted to be able to form this partnership with Santos and accelerate the development of our LNG business with this high quality asset. The partnership and Bonaparte Basin development is a key priority for GDF SUEZ globally. By extending our reach to the Asian market, it allows us to offer a truly global LNG marketing platform to our customers. This consolidates GDF SUEZ position as a world leader in LNG with a presence across the entire value chain and notably as the largest LNG end user in Europe and the third largest end user of LNG in the world."
"Furthermore, through this project, the Group continues to grow in the exploration and production business as this transaction will increase our long term resources," concluded Gérard Mestrallet.
The sale agreement is conditional upon Australian Foreign Investment Review Board and other customary consents and regulatory approvals.
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