LNG

Australian and Papua New Guinea liquefied natural assets owner Santos posted a first-quarter decline in LNG sales revenues as prices dropped in various operations, though reported progress in projects in Australia to boost gas resources. 

Santos said overall revenues in the first three months of 2024 fell to US$1.39 billion from US$1.63Bln in the prior-year quarter, including LNG, domestic gas, crude oil, condensate and liquefied petroleum gas.

Quarterly LNG sales alone amounted to US$901 million, down from US$1.07Bln in the same quarter of 2023.

LNG shipments

Santos’s LNG projects shipped 53 cargoes in the first quarter, of which five were sold on a Japan-Korea Marker-linked basis, all from PNG offtake.

The company said average realised LNG prices fell to US$12.68 million British thermal units in the first quarter from $14.46 MMBtu in the same quarter of 2023.

However, the LNG price was slightly higher than the prior quarter price of US$12.33 MMBtu to the end of December, while realised prices were higher for oil-linked sales contracts reflecting the lagged Japan Customs-cleared Crude (JCC) prices.

Three-month lagged JCC averaged US$92.29 a barrel in the first quarter of 2024 compared with US$83.08 a barrel in the fourth quarter of 2023.

The Gladstone LNG plant in Queensland sent out 27 cargoes, two fewer than in the previous quarter and the same as in the prior-year quarter.

Santos said 60 onshore coal-seam gas well were drilled and 47 connected for the Gladstone plant during the first three months of 2024 to maintain output from the Fairview, Arcadia and Roma CSG fields.

The PNG plant at Caution Bay operated by ExxonMobil Corp. shipped 27 cargoes compared with 30 in the previous three months and 28 in the prior-year quarter.

PNG expansion

“Steady production continued at PNG LNG, supported by strong production from Santos-operated fields. LNG production was down on the previous quarter due to a combination of Hides field natural decline and annual preventative maintenance undertaken at the Central Processing Facility during the quarter,” Santos explained.

French major TotalEnergies, operator of the Papua LNG project to expand PNG LNG production, has advised Santos that it would keep working with contractors to agree commercially-viable engineering, procurement and construction contracts to reach an expected final investment decision by 2025.

Santos Chief Executive Kevin Gallagher said the “strong underlying business performance, combined with a disciplined focus on operational excellence” delivered a “robust” first-quarter result.

“The first quarter brought strong free cash flow which provides a solid foundation for the year ahead. It positions us well to fund shareholder returns, backfill and sustain our existing business, complete our major projects and grow our Santos Energy Solutions business,” Gallagher said.

“I am very pleased that Barossa pipelaying activities are now almost complete and all other Barossa activities are progressing well with first gas expected in the third quarter of 2025,” said Gallagher on the project that will help resume LNG output at the Darwin liquefaction plant in the Northern Territories.

Barossa gas update

The existing Bayu-Undan field continued to produce gas for the Darwin plant through the first quarter for the domestic market.

“The asset is expected to reach end of field life in the second quarter of 2024,” said Santos.

The Barossa gas and condensate project to backfill Darwin LNG is currently 70.6 percent complete and the integration of the topside modules on the floating production storage and offloading (FPSO) platform continued in Singapore with 13 of 16 modules successfully loaded onto the hull.

The company added that installation of the gas export pipeline for Darwin LNG commenced in November 2023 with 213 kilometres of the 262km pipeline completed to the end of the first quarter. Full completion was expected before the start of May.

Gallagher said that the company’s Pikka oil project in Alaska had made excellent progress over the winter months and was on track for first production in 2026.

“Barossa and Pikka are world-class projects that will be transformative for Santos and set the company up with long-term, stable cash flows for the next 10-15 years at least,” the CEO said.

Gallagher explained that the company’s Moomba carbon-capture and sequestration project in south Australia was on scheduled for the first injections of CO2 this year and would “a game-changer for decarbonising” of Santos operations.

“We can now see line of sight to our major projects progressively coming online in 2024, 2025 and 2026, putting us in a strong position to deliver sustainable, long-term shareholder returns,” Gallagher stated. 

Australian liquefied natural gas operator Santos has yet to detail any additional progress in its merger talks the Australian peer Woodside Energy for a combination valued at A$88 billion (US$58Bln), though has made advances on the Barossa gas project for Darwin LNG and signed deals with two Japanese companies for the Moomba carbon-capture and storage venture.

Santos has become the latest Australian energy company along with Woodside Energy to have multi-billion dollar offshore natural gas pipeline projects blocked by the Federal Court of Australia for reasons of “underwater cultural heritage” even as in the case of Santos an independent expert anthropologist concluded that no such underwater cultural heritage places existed in the whole area.

Australian liquefied natural gas plant operator Santos reported a decline in LNG sales income as production and Asia-Pacific prices fell and the Darwin plant continued to suffer feed-gas issues as the supplying field depleted.

Australian liquefied natural gas plant operator Santos reported a decline in LNG sales income as production and Asia-Pacific prices fell and the Darwin plant continued to suffer feed-gas issues.

Australian liquefied natural gas plant operator Santos, which has plant and project stakes in Queensland and in the Northern Territory as well as in Papua New Guinea, reported a jump in LNG sales revenues to US$1.116 billion from US$427 million in the same three months of 2021.

Australian LNG plant operator Santos has signed a binding long-term LNG supply and purchase agreement (SPA) for the Barossa gas project with Mitsubishi Corp., the  prominent Japanese sector player with stakes in the US Cameron LNG plant in Louisiana and LNG Canada in British Columbia.

Australia LNG operator Santos said it signed an accord to sell a 12.5 percent interest in the Barossa natural gas project planned as a feed-gas source for Darwin LNG to the largest Japanese LNG importer, JERA Co. Inc.

Australian LNG plant operator Santos has awarded contracts to European firms for the supply and installation of subsea infrastructure for the Barossa natural gas field that will provide future feed-gas for the Darwin LNG export plant in the Northern Territory.

Santos, operator of the Gladstone LNG plant in Queensland and with stakes in Darwin LNG and the Papua New Guinea plant, said these contract awards were the final commitment made prior to the final investment decision for the Barossa project.

The contract for the transport and installation of all the subsea umbilicals, risers, and flowlines, as well as the supply of the in-field flowlines, was awarded to European firm Subsea 7, while Aker Solutions of Norway will supply the umbilicals and National Oilwell Varco Denmark I/S will supply the flexible risers.

“These are the final major facilities contracts for Barossa as we get closer to pushing the button on the project’s development in the second quarter,” said Santos Chief Executive Kevin Gallagher.

“They follow the award of the floating production, storage and offloading  (FPSO) unit, subsea wells and subsea production system, and gas export pipeline tenders, with the contract for the drilling of the production wells to be awarded in the near future,” explained Gallagher.

“They represent the final stages of the front-end engineering design phase and give us greater certainty over cost and schedule for the Barossa development,” stated the CEO of the Adelaide-based company.

The Barossa project area encompasses petroleum permit NT-RL5 located in Commonwealth waters, 300 kilometres north of Darwin, offshore the Northern Territory.

The development concept consists of an FPSO, six subsea production wells, supporting in-field subsea infrastructure and a gas export pipeline tied into the existing Bayu-Undan-to-Darwin pipeline, supplying gas to Darwin LNG.

On 14th October 2019, Santos announced the acquisition of Australian assets from ConocoPhillips in northern Australia.

These included the Timor-Leste portfolio including its interests in Darwin LNG and the Bayu-Undan and Barossa gas fields. 

Completion of the transaction and the planned sell-down to SK E&S of South Korea will leave Santos with increased stakes in these assets amounting to 43.4 percent for Darwin LNG, 43.4 percent for Bayu-Undan and 62.5 percent of the Barossa field.

Santos has said it was prepared to sell down equity in Barossa to a target ownership of 40-50 percent to achieve increased partner alignment.