Santos inks Barossa LNG deal with Mitsubishi

Australian energy company Santos had signed a long-term LNG deal with Mitsubishi Corporation’s Diamond Gas International.

The LNG supply and purchase agreement is for the supply of 1.5 million tonnes per annum LNG from the Barossa project for a period of 10 years, Santos said in its statement.

The deal includes extension options and is concluded at a price based on the Platts Japan Korea Marker (JKM).

Santos also has options to pursue further LNG transactions through commercial flexibilities negotiated with DGI.

Santos managing director and CEO Kevin Gallagher said the agreement with DGI was another significant step towards a final investment decision on Barossa, which is targeted for the first half of 2021.

“The SPA delivers a firm LNG offtake arrangement which represents over 80 per cent of Santos’ equity LNG volume from the Barossa project at our expected 50 per cent interest level following the previously announced sell-down to JERA, while the JKM-indexation provides portfolio balance to our existing oil-linked LNG offtake agreements from GLNG and PNG LNG,” Gallagher said.

He added that It also represents the first Santos long-term equity LNG sale from one of its major LNG projects, demonstrating the marketing capability to meet customer needs in the market.

In addition to the long-term SPA, Santos and Mitsubishi Corporation have signed a memorandum of understanding to jointly investigate opportunities for carbon-neutral LNG from Barossa.

These include collaborating on opportunities relating to Santos’ Moomba carbon capture and storage (CCS) project, the pursuit of carbon-neutral LNG, bilateral agreements for carbon credits, and potential future development of zero-emission hydrogen.

Santos’ Moomba CCS project is FID-ready and will have the capacity to safely and permanently store 1.7 million tonnes per annum of CO2 deep underground in depleted natural gas reservoirs, subject to government approval regarding eligibility for Australian Carbon Credit Units.

Santos currently holds a 62.5 per cent operated interest in the Barossa joint venture along with partner SK E&S (37.5 per cent).

Santos is also a joint venture partner and operator in Darwin LNG with a 68.4 per cent interest.

Completion of the planned sell-downs to SK E&S and JERA, announced in early 2020, will see Santos’ interests in Darwin LNG and the Barossa project change to 43. per cent and 50 per cent, respectively.

The sell-downs are subject to customary consents, regulatory approvals and FID on Barossa.