The $US3.6 billion Barossa gas project will go ahead, Santos announced today, a move that will extend the life of the Darwin LNG plant.
The $US3.6 billion Barossa Gas project will go ahead, Santos announced today, a move that will extend the life of the Darwin LNG plant.
The Darwin plant has processed gas from the Bayu-Undan field, which is reaching the end of its life.
Barossa will tie-back into the plant, which has a capacity of 3.7 million tonnes annually.
Santos’s final investment decision on Barossa will also mean $US 600 million to extend the life of the Darwin LNG plant for around 20 years.
The company said the project was the biggest investment in Australia’s oil and gas sector since 2012, although Chevron’s Gorgon stage two had been estimated at $US4 billion when it went ahead in 2018.
Last week, Santos awarded a services contract to BW Offshore, which would construct and operate the Barossa floating production storage and offloading vessel.
That had contributed to a $US1 billion reduction in capital requirements for Barossa, Santos said.
Santos would have an option to buy out the FPSO.
The vessel will be built in South Korea and Singapore.
The Barossa final investment decision was the last condition to sell 25 per cent equity in Darwin LNG and Bayu-Undan to SK E&S, while JERA and Santos are also progressing a move for JERA to buy 12.5 per cent of Barossa.
Wood Mackenzie research analyst Shaun Brady said the decision made sense given LNG demand expected in the region in the next two decades.
“As Barossa was the only logical backfill option for DLNG, the Darwin facility would have had to shut down for an extended period if it was not sanctioned, with partners incurring significant decommissioning costs,” he said.
"Barossa is an economically attractive backfill investment because it can utilise the existing DLNG infrastructure.
“As a result, it can compete with greenfield global projects that need to construct expensive new LNG infrastructure.”
But Mr Brady said the Barossa project had high emission intensity and would need to be offset through other projects.
"This year is shaping up to be the most important year in Australian upstream investment in over a decade,” he said.
“Barossa is the single largest upstream project to be sanctioned since 2012.
“With Woodside also targeting Pluto train two and Scarborough final investment decision in (the second half of 2021), and Chevron aiming to sanction additional subsea spend at Gorgon LNG, 2021 could define the upstream capital landscape in Australia for the rest of the decade.”