LNG

McDermott International of the US was awarded the main engineering contract from Australian LNG plant operator Santos for the offshore Bayu-Undan infill well that serves the Darwin liquefaction export plant in the Northern Territory.

McDermott said the contract is for subsea, engineering, procurement, construction and installation (EPCI) work for the Phase 3C project in the Timor Sea, located about 310 miles (500 kilometres) off the northwest coast of Darwin and 124 miles (200km) off the southeast coast of Timor-Leste.

“McDermott has a strong track record of delivering complex subsea projects in the Asia Pacific,” said Mahesh Swaminathan, McDermott's Senior Vice President for the region.

“We will continue that tradition as we demonstrate our execution expertise and safety excellence throughout this project,” added Swaminathan.

The Bayu-Undan field is one of Timor-Leste's largest gas fields and Santos become operator in May 2020 after buying out the stake of US major ConocoPhillips.

Preliminary work on the Phase 3C project commenced in May 2021 and the scope will be managed by McDermott's office in Perth, Western Australia.

“The McDermott scope involves a tieback of a single in-field well to existing facilities re-using existing flexible flowline with a new umbilical and certain infrastructure,” explained the Houston, Texas-based company.

Santos, as operator of the Bayu-Undan Joint Venture, has already started the new infill drilling programme in the field in the waters of Timor-Leste.

The programme was given a final investment decision in January 2021 and comprises three production wells for additional natural gas and liquids reserves, extending field life as well as production from the offshore facilities and the Darwin liquefaction plant.

The Adelaide-based company said the wells would be drilled using the “Noble Tom Prosser” jack-up rig, with first production expected in the third quarter of 2021.

Santos believes the infill drilling programme will add over 20 million barrels of oil equivalent gross reserves and production at a low cost of supply and importantly extend the life of Bayu-Undan and the jobs and investment that rely on it.

Santos noted that more than 400 Timorese are currently working on Bayu-Undan activities and this will make an important economic contribution to Timor-Leste.

The President of the Timor-Leste National Petroleum and Minerals Authority, Florentino Soares Ferreira, has said the Santos-led venture was important in the history of Timor-Leste.

“It will mark the first drilling campaign in the Bayu-Undan field as Timor-Leste offshore waters, following ratification of the Maritime Boundary Treaty (MBT) between Timor-Leste and Australia,” stated Soares Ferreira.

Santos as operator has a 43.4 percent stake in Bayu-Undan. The remaining stakes are held by South Korea’s SK E&S (25 percent), Inpex Corp. of Japan (11.4 percent), Italy’s Eni (11 percent), while Japanese utilities JERA Co. Inc. and Tokyo Gas own 6.1 percent and 3.1 percent respectively.

Australian LNG plant operator Santos, as operator of the Bayu-Undan Joint Venture in the Timor Sea, has started its new infill drilling programme for the Darwin LNG plant in the field located in the waters of Timor-Leste.

Australian LNG operator Santos has taken a positive final investment decision for the Bayu-Undan joint venture, including a drilling programme for natural gas fields supplying the Darwin LNG plant from the Timor Sea offshore East Timor and the northwest coast of Australia.

The FID covers US$235 million for the Phase 3C infill drilling at the Bayu-Undan field.

The programme comprises three production wells, two platform and one subsea, and will develop additional natural gas and liquids reserves, extending field life as well as production from the offshore facilities and Darwin LNG in Australia's Northern Territory.

Santos, based in Adelaide, said the sanctioning of the project came less than seven months after Santos became operator of the Bayu-Undan joint venture following completion of the acquisition of assets in northern Australia and in the Timor Sea from US major ConocoPhillips.

The wells will be drilled using the “Noble Tom Prosser” jack-up rig, with the first well scheduled to spud in the second quarter of 2021, and production from the first well expected in the third quarter.

“We are delighted to be able to pursue an opportunity that wasn’t on the table 12 months ago, which will optimise field recovery, extend production and deliver significant value to both the Bayu-Undan Joint Venture and the people of Timor-Leste,” said Santos Chief Executive Officer Kevin Gallagher.

“Only through a close and constructive working relationship with the Timor-Leste Government and our joint venture partners have we been able to move so quickly towards our shared goal of maximising value from the Bayu-Undan field,” added Gallagher.

“This infill drilling programme adds over 20 million barrels of oil equivalent gross reserves and production at a low of cost of supply and extends the life of Bayu-Undan, reducing the period that Darwin LNG is offline before the Barossa project comes on stream,” explained the CEO.

Santos currently has a 68.4 percent interest and operatorship in Bayu-Undan and Darwin LNG which will reduce to 43.4 percent upon completion of a 25 percent sell down to SK E&S of South Korea.

“Completion of the SK E&S sell-down is now well advanced with consent from Bayu-Undan-DLNG Joint Venture and the Timor-Leste regulator received before Christmas and we are well progressed with Australian regulatory approvals,” said Gallagher.

“The sell-down will complete once the Final Investment Decision on Barossa is taken in the first half of 2021,” he added.

The Barossa field project is a globally-competitive, low-cost LNG feed-gas project providing additional new supply for the Darwin plant.

Santos will hold around 50 percent of the Barossa venture after its previously announced sell-down deals.

Santos currently holds a 62.5 percent operated interest in the Barossa venture with its partner SK E&S, owning 37.5 percent.

The operator has additionally signed a binding long-term LNG supply and purchase agreement for the Barossa gas project with Mitsubishi Corp. of Japan.

The SPA gives Mitsubishi 1.5 million tonnes per annum of Santos equity LNG from Barossa for a period of 10 years with extension options.

The new Darwin LNG plant backfill volumes will be at the Japan-Korea Marker price for North Asian spot cargoes.

Completion of the planned stake sales to SK E&S and Japan’s largest LNG buyer, JERA Co Inc., will see Santos’s interests in Darwin LNG and the Barossa project change to 43.4 percent and 50 percent, respectively.