Australian independent oil and gas company Santos has signed a letter of intent (LOI) to sell a 12.5% interest in Barossa to Japan’s Jera
A joint venture of Tokyo Electric Power Group and Chibu Electric Power Group, Jera already owns a 6.1% interest in Darwin LNG. Santos’ signing of the LOI with Jera advances partner alignment between the Darwin LNG and Barossa joint ventures for the development of Barossa as backfill for Darwin LNG.
About 500 km northwest of Darwin LNG in the Timor Sea, the Bayu-Undan facility currently supplies the plant with gas via a subsea pipeline. The facility includes a central production and processing complex with a floating production, storage and offloading vessel for condensate and LPG products and an unmanned wellhead platform.
About 300 km north of Darwin, the Barossa gas field will be developed as the source of gas to backfill Darwin LNG when Bayu-Undan ceases production.
The LOI with Jera follows an agreement reached by Santos to sell a 25% interest in Darwin LNG to South Korean energy company SK E&S.
Santos managing director and chief executive Kevin Gallagher said, “Santos continues to build alignment between the Darwin LNG and Barossa joint ventures. Following completion of the ConocoPhillips acquisition and the sell-downs to Jera and SK E&S, Santos will hold a 43.4% interest in Darwin LNG and a 50% interest in Barossa.” Added Mr Gallagher, “We are continuing to advance discussions with other parties for the sale of further equity in the Barossa project in line with our previously stated target ownership level of around 40% to achieve increased partner alignment and prudent future allocation of growth capital. We are also in discussions with buyers for Barossa volumes.”
Hanging over the discussions are the current low oil price environment and ongoing economic uncertainty generated by the Covid-19 pandemic. It has caused Santos to defer the FID on the Barossa project until business conditions improve. “Barossa remains an important project for Santos due to its brownfield nature and low cost of supply, and we will continue to use this time to achieve alignment and seek to further strengthen the economics of the project,” Mr Gallagher said.
The sale of the 12.5% interest in Barossa to Jera is subject to the negotiation and execution of a binding sale and purchase agreement, completion by Santos of the acquisition of ConocoPhillips’ northern Australia and Timor-Leste portfolio as announced in October 2019, third-party consents, regulatory approvals and an FID on Barossa.