Santos to acquire ConocoPhillips LNG assets for $2.1bn

Santos has secured a deal worth $US1.44 billion ($2.1 billion) to acquire ConocoPhillips’ liquefied natural gas (LNG) assets in northern Australia.

Adelaide-based Santos will pay $US1.39 billion for ConocoPhillips’ share of the Darwin LNG, Bayu-Undan and Poseidon gas assets, while a further $US51 million is contingent on a final investment decision being made at Barossa.

Santos claims the acquisition will save it between $US50 million and $US75 million a year. The company already holds a minority stake in Darwin LNG and the Barossa project, which is 300 kilometres offshore north of Darwin.

With the proposed acquisition, Santos will become operator of both projects, holding 68.4 per cent of Darwin LNG and 62.5 per cent of Barossa.

Santos managing director and chief executive Kevin Gallagher said the acquisition fully aligned with Santos’ growth strategy to build existing infrastructure positions, while advancing an aim to be a leading LNG supplier.

“This acquisition delivers operatorship and control of strategic LNG infrastructure at Darwin, with approvals in place supporting expansion to 10 million tonnes per annum, and the low cost, long life Barossa gas project,” Gallagher said.

“These assets are well known to Santos. It also continues to strengthen our offshore operating and development expertise and capabilities to drive growth in offshore northern and Western Australia.”

Santos is, however, targeting to sell down equity in Darwin LNG and Barossa to 40 to 50 per cent in order to create alignment between joint venture participants, according to Gallagher.

“We are also in discussions with existing Darwin LNG joint-venture partners to sell equity in Barossa and further equity in Darwin LNG and also with LNG buyers for offtake volumes,” Gallagher said.

“Santos will target the contracting of ~60-80 per cent of LNG volumes for 10+ years prior to taking FID on Barossa, which is expected by early 2020. Discussions to date have demonstrated strong interest in Barossa LNG, given it is a brownfield upstream development located close to North Asian demand.”

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