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December 10, 2020

Santos and Mitsubishi sign long-term LNG supply and purchase agreement

Australian energy major Santos has signed a long-term liquefied natural gas (LNG) supply and purchase agreement with Mitsubishi subsidiary Diamond Gas International (DGI).

By Himaja Ganta

Australian energy major Santos has signed a long-term liquefied natural gas (LNG) supply and purchase agreement with Mitsubishi subsidiary Diamond Gas International (DGI).

The agreement is for the supply of LNG from the Barossa project offshore Northern Australia.

The Barossa project is a gas and condensate field located in the Bonaparte Basin of the Timor Sea offshore Australia, in water depths ranging between 130m and 350m.

Under the latest agreement, Santos will supply 1.5 million tonnes per annum (Mtpa) of LNG from the offshore project for an initial period of ten years.

The contract also has extension options.

Santos managing director and CEO Kevin Gallagher said: “Barossa is a globally-competitive, low-cost brownfield LNG project providing new supply into a tightening LNG market, where JKM-based pricing is an increasingly deep, liquid and flexible marker for both sellers and buyers.

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“The SPA delivers a firm LNG offtake arrangement, which represents over 80% of Santos’ equity LNG volume from the Barossa project at our expected 50% interest level following the previously announced sell-down to JERA while the JKM-indexation provides portfolio balance to our existing oil-linked LNG offtake agreements from GLNG and PNG LNG.”

The contract will support in achieving Barossa’s final investment decision (FID), which is expected in the first half of next year.

Santos has a 62.5% interest in the Barossa joint venture (JV) and partner SK E&S owns the remaining 37.5% stake.

Besides the long-term agreement, Santos and Mitsubishi signed an MoU to jointly explore opportunities for carbon-neutral liquefied natural gas from the Barossa project.

In April, Santos signed an LoI to divest a 12.5% stake in Barossa project to Japanese firm JERA.

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