LNG

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 exporter Santos reported a boost in reserves and resources available for two of its liquefaction plants, the Gladstone facility on Curtis Island in Queensland and Darwin LNG in the Northern Territory.

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.

Italian energy company Eni has retained investment bankers to find buyers for its Australian natural gas, LNG and oil assets as it aims to concentrate on other markets in the years ahead such as the Middle East and Mozambique in southeast Africa.

Executives said the investment banking arm of New York-based Citgroup Inc. was seeking interested parties in the Australian assets.

Eni has offices in Perth, Western Australia, and in Darwin, in the Northern Territory as well as Dili, in Timor-Leste where it also owns assets.

In Australia, Eni owns and operates the Blacktip gas field, supplying gas to Australia’s Northern Territory for power generation and industrial uses.

In the Joint Petroleum Development Area between Timor-Leste and Australia, Eni holds a 40 percent shareholding in the Kitan Oil Project, and an 11 percent interest in both the Bayu-Undan Gas Condensate Project and the Darwin LNG plant, which liquefies feed-gas from the Bayu-Undan fields in the Timor Sea.

The Kitan oil field is located 170 kilometres offshore Timor-Leste coast and 550km northwest of Darwin.

Eni also has a 100 percent interest in permits WA-33-L and WA-69-R in the Bonaparte basin offshore Australia’s Northwestern coast where the the Blacktip gas field and the Penguin gas discovery are located.

The Blacktip gas field is located in a water depth of around 50 metres. The facilities are comprised of an unmanned production platform, an offshore pipeline of around 110 kilometres connected to the Yelcherr Onshore Gas Plant in the Northern Territory.

Eni is led by Chief Executive Claudio Descalzi who was reappointed recently to his CEO post for a third term, and analysts said he would now embark on a restructuring of assets to help the company navigate the current slump.

Australian company Santos agreed to sell 25 percent of the Darwin LNG facility and the Bayu-Undan gas field off Northern Australia to South Korea’s SK E&S for US$390 million after agreeing to buy-out the interests of ConcocoPhillips in the Northern Territory and the Timor Sea.

The Eni assets in northwest Australia and the Timor Sea could be worth more than US$900 million.