Santos to defer FID for major LNG project in Australia

Santos’ announced its decision to defer its FID in an earnings call as part of a company-wide response to the Covid-19 pandemic and the aftershocks, most significantly the collapse in oil prices.

The company is cutting its capital spend for 2020 by US$550M and aims for free cash flow to breakeven at an oil price of US$25 per barrel as it seeks to ensure the company continues as a low-cost and high performance business.

Commenting on the company’s response, Santos chief executive Kevin Gallagher said “given the uncertain economic impact of Covid-19 combined with the lower oil price, we expect to defer FID on Barossa until business conditions improve. Barossa remains an important project for Santos due to its brownfield nature and its low cost of supply”.

In October 2019, Santos bought ConcoPhillips’ operating assets in Barossa, Darwin LNG, Bayu-Undan and Poseidon in a US$1.4Bn deal.

The ConocoPhillips acquisition is expected to be complete in H1 2020. Following this, Santos’ interest in Bayu-Undan and Darwin LNG will increase to 68.4%.

Santos has also announced a conditional agreement to sell 25% interests in Bayu-Undan and Darwin LNG to SK E&S for US$390M and is in advanced discussions with a number of parties for equity in Barossa.

However, the company has advanced FID in its Van Gogh field, one of three subsea oil field developments in the Exmouth basin, offshore Western Australia.