Santos strikes deal for energy assets
SANTOS has struck a deal to buy a suite of assets from US energy heavyweight Conocophillips for more than $2 billion.
The oil and gas producer is paying $US1.39 billion ($2.05 billion) upfront for a majority stake in a major liquefied natural gas project in Darwin, along with other assets in ConocoPhillips’s northern Australia business.
Santos announced yesterday that it would buy operating interests in the Darwin LNG, Bayu-undan, Barossa and Poseidon gas assets.
It will pay a further $US51 million contingent on a final investment decision on Barossa, a gas and light condensate field about 300km north of Darwin.
Bayu-undan is also a gas field, in the Timor Sea, while Poseidon is a gas field in the Browse Basin, off the northern coast of Western Australia.
Santos chief Kevin Gallagher said the deal delivered the group operational control “of strategic LNG infrastructure at Darwin, with approvals in place supporting expansion”.
Santos has a minority stake in both Darwin LNG and the Barossa project.
After the deal is complete, it will own 68.4 per cent stake of Darwin LNG and 62.5 per cent of Barossa.
But Mr Gallagher said Santos planned to sell down its equity to a range of about 40 per cent to 50 per cent.
South Korean “energy and solution” provider SK E&S Australia, which holds a 37.5 per cent share in Barossa, had signed a letter of intent to buy a quarter stake in Darwin LNG and was “highly supportive” of the transaction, Mr Gallagher said.
Barossa is the leading candidate to provide extra supplies to Darwin LNG when the Bayu-undan gas field is exhausted, expected in 2022.
Santos wants to have deals in place for sales of most of the gas from Barossa for the next 10 years before signing off early next year on the project.
Mr Gallagher said that so far, there had been a “lot of appetite” for the gas, given the project was so close to areas of strong demand in Asia.
The plan was to develop Barossa using sub-sea wells tied to a floating production, storage and offloading supertanker, Santos said.
A 260km gas pipeline would then transport gas to the Bayu-undan pipeline for onwards transport to Darwin LNG, where it would be cooled until it liquefies at minus 161C for transport to Asian markets.
Santos plans to pay for the assets using $US1.2 billion in cash on hand and $US750 million in debt.
Conocophillips executive vice president and chief operating officer Matt Fox said while the company was proud of its work in Western Australia, the sale “allows us to allocate capital to other projects that we believe will generate the highest long-term value to Conocophillips”.
Mr Gallagher said Santos had no plans to develop Poseidon, in waters 500m deep some 480km north of Western Australia, for now.