LNG

Santos, the Asia-Pacific LNG operator with assets in Australia and Papua New Guinea and that recently held unsuccessful merger talks with Australian peer Woodside, has issued its annual reserves statement showing resources comprising 84 percent natural gas and 16 percent liquids.

Australian liquefied natural gas operator Santos said its share of LNG output from its stakes in Australian and Papua New Guinea would be increasing in the years ahead as it also gave key dates for final investment decisions and first gas while acknowledging obstructions to its offshore activities by Australian regulatory uncertainty.

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.

Santos, the Australian liquefied natural gas operator of plants in Queensland and the Northern Territory, has hailed the judicial review decision to uphold the approval of the Narrabri Gas project to supply New South Wales.

Santos, the Australian LNG plant operator pursuing the takeover of Oil Search and its Papua New Guinea LNG assets, reported record quarterly sales revenue of US$1.07 billion and record first-half income of US$2.04Bln, up 12 percent and 22 percent respectively. 

BW Offshore, the Norway-listed floating production units provider for oil and gas, has been awarded an Australian contract worth US$4.6Bln by LNG operator Santos for the Barossa gas field to provide feed-gas for the Darwin liquefaction plant.

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.

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.

Inpex Corp., the largest Japanese exploration and production company and an Australian LNG plant operator, said it concluded a loan refinancing agreement for a portion of the loans taken out to develop the Ichthys facility near Darwin.

The company said the refinancing arrangements covered project finance loans arranged in 2012 with export credit agencies (ECAs) and commercial banks.

Total project finance loans for the Ichthys project amounted to approximately US$15.6 billion, of which the new refinanced amount covered in the latest agreement is US$8.3Bln.

The agreement involves seven ECAs and 28 commercial banks.

Inpex said the agreement includes loan conversions and improved borrowing conditions.

“The loan refinancing agreement is the result of a refinancing bid formally issued by Inpex in March 2020 with the objective of improving borrowing conditions, based on the Project achieving financial completion in December 2019 and continuing to sustain stable production operations,” explained the Japanese company.

Inpex is operator of the Ichthys plant at Bladin Point near Darwin and is also developing the Abadi LNG project in Indonesia with Royal Dutch Shell.

The plant came on stream in 2018 and produces almost 9 million tonnes per annum of LNG from two processing Trains.

Shares in Ichthys LNG held by Inpex amount to around 66 percent of equity, while French major Total has 26 percent.

Micro-stakes are held by CPC Corp. of Taiwan and Japan’s main utilities and LNG buyers, JERA Co. Inc., Tokyo Gas, Osaka Gas, Kansai Electric and Toho Gas.

“The project’s smooth progress despite the impact of the decline in oil prices caused by the spread of Covid-19 and other factors was evaluated favorably,” stated Inpex.

“Accordingly, Inpex received commitments from financial institutions exceeding the amount expressed in the refinancing bid,” it added.

Inpex said it believed that the refinancing agreement would enhance the value of the Ichthys project by reducing the financial commitments.

“Furthermore, the agreement is part of INPEX’s cost reduction initiatives under the company’s basic policy in response to the decline in oil prices and is expected to contribute to improving the resilience of the Inpex Group’s business structure,” it explained.

“Inpex will continue to lead efforts to sustain stable operations at the project with the understanding and cooperation of all its stakeholders,” said the company.

“These include the project’s joint venture participants, the local communities, the Australian federal government and the governments of the Northern Territory and Western Australia,” it stated.

ConocoPhillips, whose predecessor company started US liquefied natural gas exports from the state of Alaska 50 years ago, has agreed to sell its operated Darwin LNG export plant in Australia and other gas assets to Australian energy company Santos.