Santos greenlights Australia’s Barossa development

Largest oil and gas investment in close to a decade

SANTOS has sanctioned a US$3.6bn investment in the Barossa gas project off Australia’s Northern Territory, extending the life of the Darwin LNG plant and marking the largest investment in the country’s oil and gas sector since 2012. Concerns about the climate impacts of the project have prompted one group to label the project “a carbon bomb”.

The Barossa development includes a floating production, storage and offloading (FPSO) vessel, subsea production wells, supporting subsea infrastructure and a gas export pipeline tied into the existing Bayu-Undan-to-Darwin LNG pipeline. The Barossa field is located around 300 km north of Darwin and the first production of gas is expected in the first half of 2025.

The decision to sanction a final investment decision (FID) in Barossa had been delayed due to the turmoil in the energy markets caused by the Covid-19 pandemic. The investment will shore up dwindling output from the Bayu-Undan fields and Santos says the decision extends the life of the 3.7m t/y Darwin LNG plant by around 20 years.

Santos CEO Kevin Gallagher said: “Barossa and Darwin LNG life extension will create 600 jobs throughout the construction phase and secure 350 jobs for the next 20 years of production at the Darwin LNG facility.”

The decision extends the life of the 3.7m t/y Darwin LNG plant by around 20 years...and (will) secure 350 jobs for the next 20 years of production

Wood Mackenzie Research Analyst Shaun Brady said: “This decision makes a lot of sense given the significant LNG demand expected across Asia Pacific through the next two decades. As Barossa was the only logical backfill option for Darwin LNG, the Darwin facility would have had to shut down for an extended period if it was not sanctioned, with partners incurring significant decommissioning costs.”

High carbon concerns

The high carbon dioxide content in the Barossa gas field – around 18% – has sparked environmental concerns. A project document submitted to Australia’s offshore energy regulator Nopsema noted that levels of CO₂ in the field are higher than others in the region. The submission outlines the need for the FPSO to strip out CO₂ to reduce the proportion heading to Darwin in the feed gas to 6%. The captured gas would then be released to atmosphere at a rate approaching 3.8m t/y. On top of this, Australia’s Clean Energy Regulator records emissions from the Darwin LNG plant at 1.7m t/y.

John Robert, a process engineer and industrial economist who wrote an analysis of Barossa for the Institute for Energy Economics and Financial Analysis (IEEFA) said: “This makes the Barossa to Darwin project ‘a CO₂ emissions factory with an LNG byproduct’ – a truly questionable investment in a rapidly evolving market.”

The analysis also questions whether BWO, the firm contracted to build and operate the FPSO, has sufficient experience. It reports that BWO’s existing fleet of FPSOs averages 82m ft³/d of gas processing capacity, and its largest at 353m ft³/d is less than half that required for Barossa.

“Such a plant processing 800m ft³/d from 18 v% CO₂ to 6 v% is a challenging proposition onshore, let alone on a moving ship located 300 km from land,” Robert writes.

The report also asks how the project is consistent with BWO’s plans to take urgent action to combat climate change and its impacts; and why Nopsema approved the project in light of its regulatory responsibilities for environmental management.