PERTH (miningweekly.com) – Oil and gas major Santos has inked a letter of intent (LoI) to divest of a 12.5% interest in its Barossa project, in Northern Australia to project partner JERA.

The Barossa gasfield sits within Santos’ Northern Australia portfolio, one of the company’s core long-life, natural gas asset regions. The project is currently in the front-end engineering design phase, which includes the floating production, storage and offloading (FPSO) facility, subsea production system and gas export pipeline.

Santos earlier this year announced its intention to delay a final investment decision on the Barossa project amid the Covid-19 pandemic and falling oil prices.

Santos on Thursday said that the signing of a LoI with JERA, which already holds a 6.1% interest in the Darwin liquefied natural gas (LNG) facility, advanced the partner alignment between Darwin LNG and the Barossa joint venture (JV) for the development of Barossa as a backfill for Darwin LNG.

“Santos continues to build alignment between the Darwin LNG and Barossa JVs. 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,” said Santos MD and CEO Kevin 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.”

Gallagher noted that the Barossa project remained an important project for Santos owing to its brownfield nature and the low cost of supply, with the company using this time to achieve alignment and seek to further strengthen the economics of the project.

The sale of a 12.5% interest to JERA is subject to the execution of a binding sales and purchase agreement, completion by Santos of the acquisition of ConocoPhillips’s northern Australian and Timor-Leste portfolio, third party consent, regulatory approvals and a final investment decision on Barossa.