The FID also triggers a $600-million investment in the Darwin LNG life extension and pipeline tie-in programs, designed to extend the productive life of the facility life by around two decades.
The Darwin LNG plant has capacity to produce around 3.7 MM metric tons/yr (4.08 MM tons) of LNG.
Santos claimed Barossa would be one of the world’s lowest cost, new LNG supply projects giving the Darwin LNG a competitive advantage in a tightening market.
This is also Australia’s largest oil and gas investment since 2012, the company added.
Santos Managing Director and CEO Kevin Gallagher said the two investment programs would create 600 jobs throughout the construction phase and secure 350 jobs for the next 20 years at Darwin LNG.
Development plans for Barossa call for a new FPSO, to be supplied by BW Offshore, connected to subsea production wells, new subsea infrastructure and a gas export pipeline tied into the existing Bayu-Undan to Darwin LNG offshore pipeline.
First gas is targeted for the first half of 2025.
Late last year Santos finalized arrangements for Barossa gas through Darwin LNG, supported by a long-term LNG sales agreement with Mitsubishi subsidiary Diamond Gas International for 1.5 MM metric tons/yr (1.71 MM tons) of Santos-equity LNG over at least a 10-year period.
In addition, the company has signed memoranda of understanding with SK E&S and Mitsubishi to jointly assess opportunities for carbon-neutral LNG from Barossa, including collaboration relating to Santos’ onshore Moomba CCS project and potential future development of zero-emissions hydrogen.
The Barossa FID is the final condition for completion of the company’s 25% equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S, which is also a partner in Barossa. Santos is also progressing an agreement under which JERA will acquire a 12.5% stake in Barossa.
The deals would reduce Santos’ interests in Bayu-Undan and Darwin LNG to 43.4%, and to 50% in Barossa.
Wood Mackenzie research analyst Shaun Brady, commenting on the development, said: “This decision makes a lot of sense given the significant LNG demand expected across Asia/Pacific through the next two decades.
“As Barossa was the only logical backfill option for DLNG, the Darwin facility would have had to shut down for an extended period if it was not sanctioned, with partners incurring significant decommissioning costs.
“Barossa is an economically attractive ‘backfill’ investment because it can utilize the existing DLNG infrastructure. As a result, it can compete with greenfield global projects that need to construct expensive new LNG infrastructure.”
The project is also key to Santos’ ambition to grow its production to 329,000 boe/d, Brady said.
“The oil price crash has helped Santos optimize the Barossa project plan and reduce its capital costs. BW Offshore swooped in and won the FPSO contract from MODEC by offering a hybrid lease that would defer significant capital spend for the Barossa joint venture…
“2021 is shaping up to be the most important year in Australian upstream investment in over a decade. Barossa is the single largest upstream project to be sanctioned since 2012.
“With Woodside also targeting Pluto T2 and Scarborough FID in H2, and Chevron aiming to sanction additional subsea spend at Gorgon LNG, 2021 could define the upstream capital landscape in Australia for the rest of the decade.”