Santos has awarded a $4.6bn contract to BW Offshore to supply the floating production, storage, and offloading (FPSO) vessel for the $3.6bn Barossa offshore gas and condensate project in Australia.

Under the contract, BW Offshore will be responsible for the construction, connection, and operation of the vessel, which will be leased and operated for 15 years alongside ten years of options.

However, the contract is subject to final investment decision (FID) on Barossa project by Santos and its partners. The decision is expected in the coming weeks.

Additionally, the contract includes an upfront pre-payment and an option to buyout. Santos further stated that the contract attains an overall reduction in capital costs of nearly $1bn.

Santos managing director and CEO Kevin Gallagher said: “The decision to proceed with an FPSO services contract maintains a low ongoing operating cost while engineering enhancements have significantly reduced the project’s carbon footprint.

“This reduction in capital expenditure makes Barossa one of the lowest cost of supply projects in the world for LNG and will provide new supply into a tightening LNG market.”

The FPSO unit for the Barossa gas and condensate project will have a capacity to process up to 800 million standard cubic feet per day (MMscfd) of gas and handle up to 11,000 barrels per day of stabilised condensate.

BW Offshore plans to build the FPSO in South Korea and Singapore. The processed natural gas from the FPSO will be exported to the Darwin LNG plant via the Darwin pipeline system.

At present, Santos has a 62.5% stake in the Barossa joint venture as the operator while SK E&S holds the remaining stake of 37.5%.

Production from the Barossa project is scheduled to commence in the first half of 2025.