Santos Takes FID on $3.6B Barossa Project
Santos announced Tuesday that a final investment decision (FID) has been taken to proceed with the $3.6 billion Barossa gas and condensate project, located offshore Australia.
The company highlighted that the Barossa FID kick-starts a $600 million investment in Darwin LNG life extension and pipeline tie-in projects, which it says will extend the facility life for around 20 years. The two projects will create 600 jobs throughout the construction phase and secure 350 jobs for the next 20 years of production at the Darwin LNG facility, Santos’ Managing Director and Chief Executive Officer, Kevin Gallagher, noted.
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. First gas production is targeted for the first half of 2025, Santos revealed.
Barossa is one of the lowest cost new LNG supply projects in the world and will give Santos and Darwin LNG a competitive advantage in a tightening global LNG market, according to Santos. The project represents the biggest investment in Australia’s oil and gas sector since 2012, Santos highlighted.
Gallagher said the FID on Barossa was consistent with Santos’ strategy for disciplined growth utilizing existing infrastructure around the company’s core assets.
“Our strategy to grow around our five core asset hubs has not changed since 2016,” Gallagher said in a company statement.
“As we enter this next growth phase, we will remain disciplined in managing our major project costs, consistent with our low-cost operating model,” he added.
“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,” Gallagher went on to say.
Barossa FID is the final condition required for completion of 25 percent equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S, which is also a partner in Barossa. Completion of the SK transaction is expected to occur at the end of April and result in net funds to Santos of approximately $200 million. Santos said the company and JERA continue to progress the binding sale and purchase agreement for JERA to acquire 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. The company’s interest in the Barossa project will change to 50 percent. Santos currently holds a 62.5 percent operated interest in the Barossa joint venture, with partner SK E&S holding the remaining 37.5 percent stake.
Earlier this month, Santos announced the award of the Barossa project’s contract for the construction, connection, and operation of the FPSO to BW Offshore. The deal was said to represent the largest capital expenditure component of the approximately $3.6 billion Barossa offshore gas and condensate project.
To contact the author, email andreas.exarheas@rigzone.com
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