Australian energy company Santos is buying key northern Australian gas assets and business from the big US company ConocoPhillips for $2.2 billion.
Santos today said it had entered into a sale-and-purchase agreement to buy the bulk of Conoco's portfolio which includes the Darwin LNG plant and the Barossa gas venture off the coast.
Gas from the Barossa field, about 300 kilometres north of Darwin, is earmarked to replace declining supplies for the Conoco-led Darwin LNG venture, in which Santos also had a stake.
Santos said its purchase of operating interests in long-life, low cost natural gas assets and strategic LNG infrastructure was consistent with Santos' core asset growth strategy
Santos is also involved in exploring the potential for onshore shale gas supplies in the Beetaloo region.
Santos said it was prepared to sell down equity in Barossa and Darwin LNG to a target ownership of 40-50% to achieve increased partner alignment.
"Barossa partner SK E&S (based in South Korea) is highly supportive and has signed a Letter of Intent to acquire a 25% interest in Bayu-Undan and Darwin LNG."
Santos said it was also in discussions with existing Darwin LNG joint-venture partners for equity in Barossa and in advanced discussions with LNG buyers for Barossa offtake volumes, including with an existing partner in Darwin LNG.
Santos managing director and chief executive officer Kevin Gallagher said Santos has enjoyed a long-established relationship with ConocoPhillips which has operated its northern Australia natural gas assets for many years.
"Santos was a founding partner with ConocoPhillips in Darwin LNG, which has been operating since 2006. The acquisition of these assets fully aligns with Santos' growth strategy to build on existing infrastructure positions while advancing our aim to be a leading regional LNG supplier," Mr Gallagher said.
"This acquisition delivers operatorship and control of strategic LNG infrastructure at Darwin, with approvals in place supporting expansion to 10 mtpa, and the low cost, long life Barossa gas project.
"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 also committed to be Australia's leading domestic gas supplier and we will be pursuing domestic gas opportunities in the Territory from our broader northern Australia gas portfolio where we have significant resource potential both onshore and offshore.
"Santos intends to manage gearing within our stated operating range and is targeting to sell-down equity in Darwin LNG and Barossa to 40-50% in order to create alignment between joint venture participants as well as by optimising equity levels in our Western Australia assets.
"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.
"Santos will target the contracting of ~60-80% 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.
"We look forward to welcoming ConocoPhillips' Australia-West employees to Santos and combining the two businesses to create one high performing team with a wide range of exciting career opportunities across Santos," Mr Gallagher said.