Santos’ Barossa may face two yr delay leaving Darwin LNG empty

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The event of the Santos-led (ASX:STO) Barossa gasoline undertaking offshore Australia that may backfill the Darwin liquefied pure gasoline (LNG) export plant might be delayed by as much as two years after a Federal Courtroom ordered the operator to cease drilling on the US$3.6 billion undertaking on 21 September.

The court docket imposed the ban after a profitable problem from an indigenous group in opposition to environmental approvals for drilling and completion actions on the Barossa growth.

Australian regulator Nationwide Offshore Petroleum Security and Environmental Administration Authority (NOPSEMA) has reportedly informed Santos to plan for a delay of as much as two years, a well-placed market supply informed Vitality Voice.

The outlet that Santos is drilling is within the means of being suspended and the operator will transfer the rig, most likely to hold out a Bedout appraisal properly.

Nonetheless, there’s some headroom for potential delays provided that Barossa is already about 46% full, with start-up deliberate for 2025, Krishan Pal Birda, a senior analyst at consultancy Rystad Vitality informed Vitality Voice.

“Santos contracted the Valaris drilling rig from July 2022 to October 2023 and provided that these six deliberate Barossa wells will take a median of 70-80 days to drill and full, the contract will seemingly be prolonged contemplating this newest suspension,” stated Birda.

“The newest court docket ruling will seemingly translate into value will increase, over the at the moment estimated US$3.6 billion price ticket, relying upon the length of the present suspension,” he added.

Backfill for Darwin LNG?

Vitality Voice has additionally heard that Santos is in search of to purchase an LNG cargo to pump into Darwin LNG (DLNG) to maintain it chilly whereas they wait even longer for Barossa gasoline to backfill the export plant within the Northern Territory. Shutting down and restarting the LNG export plant could be very pricey. Nonetheless, shopping for an LNG cargo will seemingly value a number of hundred million {dollars}.

DLNG is at the moment provided with gasoline from the Bayu Undan discipline offshore East Timor, which is working low, and Santos is now dashing to decommission the ageing discipline with an eye fixed for utilizing it to retailer carbon from the emissions-intense Barossa growth. A CCS hub plan in East Timor has been broadly promoted by Santos.

Certainly, a stronger board at Santos is likely to be clamouring for solutions about undertaking threat administration simply weeks after the corporate deferred a closing funding determination (FID) on Dorado. FID has been delayed past 2022, citing value inflation and provide chain challenges, basically placing the undertaking into recycle.

Empty LNG Export Plant?

Barossa is undoubtedly a big undertaking that may finally backfill Darwin LNG, the place the present supplying discipline – Bayu-Undan – will run out of gasoline later this yr. This can depart the LNG plant idle till Barossa begins up, famous Birda.

“On high of that, Santos has already signed a long-term settlement to provide 1.5 million tonnes of LNG each year from Barossa to Diamond Fuel Worldwide, representing 80% of Santos’ fairness LNG volumes, whereas the Japanese and Korean companions have additionally invested within the undertaking to achieve fairness LNG volumes,” stated Birda.

“From a world LNG standpoint, Rystad Vitality’s forecast means that the market will likely be tight going ahead in opposition to present and sanctioned provide, which means tasks within the pipeline are required to come back on-line to plug the potential hole. If Barossa is considerably delayed, then it will take 3.75 Mt of LNG off the market in 2027 after we anticipate it to achieve full capability,” cautioned Birda.

“And since this is among the few tasks within the Asia Pacific basin, it’s all the extra essential for its patrons. They might want to exchange this from the US, which in fact will imply greater prices and dangers related to the Atlantic basin. So, any delay in Barossa could have an all-around influence,” he warned.

The Barossa gasoline discipline is situated 300 kilometres offshore Darwin in northern Australia. Barossa will likely be developed by way of a FPSO with six subsea manufacturing wells, in-field services and a gasoline export pipeline tied into the Bayu-Undan to Darwin pipeline system that provides gasoline to Darwin LNG.

Individuals within the Barossa undertaking are Santos (50% and operator), South Korea’s SK E&S (37.5%) and JERA (12.5%).

Darwin LNG is owned by Santos (43.4%), SK E&S (25%), INPEX (11.4%), Eni (11%), JERA (6.1%) and Tokyo Fuel (3.1%).

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