Santos Ltd., Adelaide, signed a binding long-term supply agreement for LNG from its Barossa project in the Timor Sea with Mitsubishi Corp. subsidiary Diamond Gas International Pte Ltd. (DGI), marking another step towards a first-half 2021 final investment decision.
The agreement is for 1.5 million tonnes/year of LNG of Santos equity LNG from the proposed field for 10 years with options to extend. The price will be based on the Platts Japan Korea Marker (JKM).
Santos said it also had options to pursue further LNG transactions through commercial flexibilities negotiated with DGI.
The agreement represents more than 80% of Santos’ equity LNG volume from Barossa at the company’s expected 50% interest level following an earlier sell-down of equity to JERA, said Kevin Gallagher, managing director and chief executive officer.
“The JKM-indexation (also) provides portfolio balance to our existing oil-linked LNG offtake agreements from the Gladstone LNG and PNG LNG projects,” Gallagher said.
“It also represents the first Santos long-term equity LNG sale from one of our major LNG projects,” he added.
With the agreement, Santos and Mitsubishi signed a memorandum of understanding to jointly investigate opportunities for carbon neutral LNG from Barossa.
Potential opportunities include those relating to Santos’ Moomba carbon capture and storage project in South Australia, the pursuit of carbon neutral LNG, bilateral agreements for carbon credits, and the possibilities involved in future development of zero emissions hydrogen.
The Santos carbon capture storage project at Moomba is FID-ready and will have the capacity to store 1.7 million tonnes/year of carbon dioxide in depleted natural gas reservoirs in the Cooper basin, subject to government approval regarding eligibility for Australian Carbon Credit Units.
Santos holds 62.5% operated interest in the Barossa joint venture. Partner SK E&S has 37.5%.
Santos is also a joint venture partner and operator of the Darwin LNG development and facilities with 68.4% interest.
When it completes the planned sell-downs to SK E&S and JERA announced earlier this year, Santos will reduce its interests in Darwin LNG to 43.4% and in the Barossa project down to 50% (OGJ Online, Mar. 12, 2020; Apr. 16, 2020).
The sell-downs are subject to the normal consents and regulatory approvals and are dependent upon Barossa development FID.