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  • In a solid indication that a final go-ahead is not far off, Santos (STO) has awarded the major contract for its Barossa gas project to BW Offshore
  • BW Offshore has been tasked with constructing a Floating Production, Storage and Offloading (FPSO) vessel
  • The ship will be built in South Korea and Singapore and will supply replacement gas for the Darwin LNG plant
  • It’s initial 15-year term values the contract at around $US4.6 billion (roughly A$6.04 billion) and includes an up-front pre-payment as well as an option to buy the vessel
  • The contract remains subject to a final investment decision, which is anticipated in the coming weeks
  • Santos is down 0.98 per cent to $7.10 per share

In a solid indication that a final go-ahead is not far off, Santos (STO) has awarded the major contract for its Barossa gas project to BW Offshore.

Based in Oslo, international vessel builder and operator BW Offshore has been tasked with constructing a Floating Production, Storage and Offloading (FPSO) vessel, which will supply replacement gas for the Darwin LNG plant.

The ship will be built in South Korea and Singapore before being towed to the oil field, roughly 300 kilometres north of Darwin. It will also store condensate for periodic offloading following the start of production in the first half of 2025.

Marco Beenen, CEO of BW Offshore, said the deal “represents a new type of infrastructure-like contract for BW Offshore with attractive long-term returns, supported by strong partnerships with equity co-investors and banks.”

Its initial 15-year term values the contract at around $US4.6 billion (roughly A$6.04 billion) and includes an up-front pre-payment as well as an option to buy the vessel.

Santos also noted this morning that the deal achieves an overall reduction in capital costs of about $US1 billion (roughly A$1.31 billion).

“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,” said Kevin Gallagher, Managing Director and CEO of Santos.

“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.”

As the operator, Santos holds a 62.5 per cent stake in the Barossa venture — which had been put on hold following last year’s oil price crash — along with its South Korean partner SK E&S, which holds the remaining 37.5 per cent interest.

Gallagher noted that the awarding of the contract to BW Offshore builds on six months of momentum, but remains subject to a final investment decision that is anticipated in the coming weeks.

“At the end of last year, we announced that transport and processing agreements had been finalised for Barossa gas to be tolled through Darwin LNG and we signed a long-term LNG sales agreement with Diamond Gas International, a wholly-owned subsidiary of Japan’s Mitsubishi Corporation,” Gallagher continued.

Santos is down 0.98 per cent to $7.10 per share at 12:45 pm AEDT.

STO by the numbers
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