PERTH (miningweekly.com) – Oil and gas major Santos on Wednesday announced that it had cut some $1-billion in expected capital expenditure from its $3.6-billion Barossa joint venture (JV).
Santos has awarded a construction, connection and operation contract for the flotation, production, storage and offloading (FPSO) JV to international vessel builder and operator BW Offshore, which is subject to a final investment decision for the Barossa project.
Santos told shareholders that the contract represented the largest capital expenditure component for the Barossa JV and contains an up-front pre-payment and buy-out option, achieving an overall reduction of around $1-billion in capital expenditure.
Santos MD and CEO Kevin Gallagher on Wednesday said the company had achieved significant financial savings and energy efficiency improvements through extensive and intensive contract review.
“The decision to proceed with an FPSO services contract maintains a low ongoing operating cost while engineering enhancements have significantly reduced the project’s carbon footprint.
“This reduction in capital expenditure makes Barossa one of the lowest cost of supply projects in the world for liquefied natural gas (LNG) and will provide new supply into a tightening LNG market.”
The FPSO will be built in South Korea and Singapore before being towed and permanently located in the field where it would process natural gas prior to its transport via pipeline to Darwin LNG.
The Barossa JV will provide the next gas source for the existing Santos-operated Darwin LNG plant, once current reserves from the Bayu-Undan field, in the Timor Sea, have been depleted.
A final investment decision on Barossa is expected in the coming weeks, with first gas targeted for the first half of 2025.
Santos is in the midst of selling a 12.5% interest in Barossa to Darwin LNG partner JERA, and has a binding agreement to sell a 25% interest in the Bayu-Undan and Darwin LNG projects to SK E&S, subject to a final investment decision on Barossa.