Santos secures $800 million loan to wrap up life extension works at Australian LNG project

Australia’s energy giant Santos has obtained the required financing to complete all the tasks on a liquefied natural gas (LNG) project’s life extension checklist and start production from its gas development project off the coast of Australia, which will backfill Darwin LNG (DLNG) for up to two decades.

The Darwin LNG plant (DLNG), a single train liquefaction and storage facility located at Wickham Point on Darwin Harbour in Northern Territory, Australia, used to receive gas from the Bayu-Undan field in the Timor Sea and convert it into LNG for sale into overseas markets since it was commissioned in 2006 up to the cessation of LNG production from the field in late 2023.

Currently, DLNG is undertaking life extension works to prolong the design life of the plant and to provide gas processing and marine loading services under a long-term contract to the Barossa joint venture (JV), which will supply feed gas from an offshore gas and light condensate project situated approximately 300 km north of Darwin.

The Darwin LNG joint venture, operated by Santos with a 43.43% interest, has achieved financial close of new syndicated bank loan facilities totaling $800 million, comprising a $350 million seven-year, partially amortizing loan maturing in 2031 and a $450 million, 12-year partially amortizing loan maturing in 2036.

Furthermore, these facilities are senior-secured by Darwin LNG as the shareholders have granted security over their shares. In line with this, the facilities are said to have received strong support from existing and new syndicated banking relationships, thus, the proceeds will be used to fund the DLNG life extension works.

While explaining that the loan showed strong support from the firm’s bank lenders, demonstrating their recognition of LNG as “a critical part of the energy transition” and willingness to support the LNG industry, Kevin Gallagher, Santos’ Chief Executive Officer, commented: “The debt raised by the Darwin LNG joint venture is wholly consistent with our strategy of securing flexible, long-duration and competitively priced funding.

“With these facilities in place, Darwin LNG is well-funded to complete the life extension works scheduled for mid-2025 and it positions Darwin LNG to consider future expansion of this important infrastructure, including through the potential provision of third-party carbon capture services in Darwin.”

After the final investment decision (FID) for the Barossa gas project in 2021, a $600 million investment in the Darwin LNG life extension and pipeline tie-in projects was kick-started, encompassing activities related to a floating production storage and offloading (FPSO) unit, known as 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.

Several deals were handed out for the Barossa field development project. BW Offshore got the contract for the construction, connection, and operation of the FPSO for the Barossa field in March 2021 and hired Dyna-Mac in May to build the topside modules.

Upon deployment, the 4.6 billion fixed 15-year FPSO contract, with additional ten-year extension options, will enable BW Offshore to take care of natural gas production at the Australian field, thanks to a $1.15 billion project debt financing in September 2021 for the construction and operation of the unit.

The FPSO Opal is slated to start its journey to Australia in the first quarter of 2025 to achieve the first gas in the third quarter of the same year. Santos confirmed in August 2024 that the Gas Export Pipeline (GEP) to deliver gas from the field to Darwin LNG was complete while construction activities for the Darwin Pipeline Duplication were underway.

Meanwhile, Santos has announced that Sherry Duhe began her new role as the firm’s Chief Financial Officer (CFO), with its CEO highlighting: “Sherry is a highly skilled and experienced executive in finance and the energy sector.

“Sherry’s demonstrated financial capability, knowledge of the complex and dynamic energy and financial markets in which Santos operates, and experience in engaging with investors, capital markets and governments, positions her well to support the Santos management team and board of directors in delivering superior value for our shareholders into the future.”