Santos inks LNG supply deal and irons out details for new partner at gas field offshore Timor-Leste

Australia’s energy giant Santos has signed a new mid-term liquefied natural gas (LNG) supply contract with Glencore Singapore (Glencore) and hammered out a deal for the divestment of a partial stake in an offshore gas project with Timor-Leste’s national oil company, TIMOR GAP.

The three-year plus one-quarter LNG supply deal with Glencore, which entails the supply of 19 LNG cargoes or up to approximately 0.5 million tonnes of LNG per annum, will start in Q4 2025 with LNG being supplied from Santos’ global portfolio of LNG assets on a delivered ex-ship basis.

While describing the new LNG deal as a great opportunity for both players to leverage their expertise in Asian LNG markets, Kevin Gallagher, Santos’ Managing Director and Chief Executive Officer, commented: “This oil-indexed contract along with the recently executed long-term LNG sales and purchase agreement with Hokkaido Gas in Japan demonstrates Santos’ strong LNG portfolio position and customer relationships in the region.

“There continues to be extremely strong demand in Asia for high heating value LNG from projects such as Barossa and PNG LNG. Santos is committed to supporting the energy security of our valued customers across Asia.”

According to the Australian energy giant, the Bayu-Undan joint venture (BUJV) has agreed on terms of a sale and purchase deed (SPD) with TIMOR GAP to transfer a 16% interest in the Bayu-Undan upstream project to Timor-Leste’s energy player, with an economic date of July 1, 2024. While the execution of the SPD for this transaction is planned to occur in mid-September, a seventh extension of the production sharing contract (PSC) to June 30, 2026, has also been sorted out.

Located around 500 kilometers northwest of Darwin in Timor-Leste waters, the Bayu-Undan field has been online since 2004, providing over $25 billion in revenue for Timor-Leste over its life up to now. The field continues to produce gas for the Australian domestic market via a gas sales agreement with the Power and Water Corporation of the Northern Territory, as well as producing valuable liquids.

Once the new joint venture partner joins the Bayu-Undan upstream project, which consists of the offshore petroleum field and offshore production and processing facilities in Timor-Leste, the project will be run by Santos (36.5%), SK E&S (21%), INPEX (9.6%), Eni (9.2%), Tokyo Timor Sea Resources (7.6%), and TIMOR GAP (16%).

Furthermore, Santos has reiterated its commitment to work with Timor-Leste and the joint venture to repurpose Bayu-Undan into a new large-scale, commercial carbon capture and storage (CCS) project when petroleum production ends, creating an ongoing source of revenue, local jobs, and business opportunities for Timor-Leste by providing carbon management services to the Asian region.

The Australian player is working on bringing online the Barossa project, which entails the FPSO BW Opal, subsea production wells, supporting subsea infrastructure, and a gas export pipeline tied into the existing Bayu-Undan to Darwin LNG pipeline to extend the facility life for around 20 years.

The final investment decision (FID) for the project was taken in 2021, kick-starting a $600 million investment in the Darwin LNG life extension and pipeline tie-in projects. The Barossa project is a joint venture between Santos (50%), SK E&S (32.5%), and JERA (12.5%). 

BW Offshore will handle natural gas production at the Barossa field, thanks to the 4.6 billion, 15-year FPSO contract, with additional ten-year extension options. The FPSO BW Opal is expected to begin its journey to Australia in the first quarter of 2025 and the first gas is slated for the third quarter of 2025.