Santos awards Barossa FPSO deal to BW with $4.6bn firm value

Australian energy giant Santos has awarded a contract for the construction, connection, and operation of an FPSO for the Barossa gas field project off Australia to BW Offshore. The firm period contract is worth about $4.6 billion.

The Barossa gas field is located 300 kilometres offshore Darwin in Australia.

The field will be developed via an FPSO with six subsea production wells, in-field facilities, and a gas export pipeline tied into the Bayu-Undan to Darwin pipeline system that supplies gas to Darwin LNG.

Santos said on Wednesday that the contract is subject to a Final Investment Decision (FID) for the project by the company and its partners and represents the largest capital expenditure component of the approximately $3.6 billion Barossa offshore gas and condensate project to backfill Darwin LNG.

The FID on the Barossa project is anticipated in the coming weeks with first gas targeted for the first half of 2025.

The contract contains an upfront pre-payment and an option to buyout, and achieves an overall reduction of approximately $1 billion in capital expenditure, Santos added.

Santos Managing Director and Chief Executive Officer, Kevin Gallagher, said: “The decision to proceed with an FPSO services contract maintains a low ongoing operating cost while engineering enhancements have significantly reduced the project’s carbon footprint”.

“This reduction in capital expenditure makes Barossa one of the lowest cost of supply projects in the world for LNG and will provide new supply into a tightening LNG market”.

In a separate statement released on Tuesday, BW Offshore said that the lease and operate contract has a firm period of 15 years, with 10 years of options. The firm period contract value is $4.6 billion.

According to BW, the unit will be a large FPSO with a processing capacity for up to 800 million standard cubic feet per day (MMSCFD) of gas and design capacity of 11,000 barrels per day of stabilised condensate.

The FPSO will be turret moored with a newbuild hull based on BW Offshore’s RapidFramework design. The topside weight is approximately 35,000 tons.

As explained by BW, the RapidFramework concept is based on experience from the development of the Catcher FPSO in 2017, allowing for concurrent hull construction and topside integration by removing interdependencies during the construction phase.

Back in February, BW said it was targeting a newbuild FPSO FID in the first half of 2021 with plans to secure equity and debt financing prior to the FID.

Santos stated that the FPSO will be built in South Korea and Singapore before being towed and permanently located in the field where it will process natural gas prior to its transport via pipeline to Darwin LNG. Condensate will be stored on the FPSO for periodic offloading.

Barossa will provide the next source of gas for the existing Santos-operated Darwin LNG plant once current reserves from the Santos-operated Bayu-Undan field in the Timor Sea have been depleted.

Marco Beenen, CEO of BW Offshore, said: “The Barossa FPSO represents a new type of infrastructure-like contract for BW Offshore with attractive long-term returns, supported by strong partnerships with equity co-investors and banks”.

BW Offshore said that the project capex of around $2 billion will be financed by banks and equity partners, in combination with BW Offshore, as well as approximately $1 billion in total advance lease payments during the construction period.

A syndicate of international project finance banks will provide 14-year debt financing during both construction and operation. BW Offshore and international infrastructure equity partners will contribute 51 per cent and 49 per cent of the project equity respectively. Both the debt and equity agreements are well advanced.