Australian oil and gas producer Santos will defer the final investment decision (FID) on the Barossa gas project due to uncertain and challenging market conditions, Kallanish Energy reports.
“Given the uncertain economic impact of covid-19 combined with the lower oil price, we expect to defer FID on Barossa until business conditions improve,” said CEO Kevin Gallagher. “Barossa remains an important project for Santos due to its brownfield nature and its low cost of supply.”
The project is a joint venture between Santos, ConocoPhillips and South Korea’s SK E&S. Its FID was originally expected in March.
The development of the gas and light condensate field, offshore Darwin, in Australia’s Northern Territory state, is crucial to feed the Darwin LNG plant. That’s because the field currently feeding the liquefaction facility is set to run dry in 2022.
Santos said in a statement earlier this week it’s implementing financial measures that are appropriate to the current environment, targeting a breakeven oil price of $25 a barrel.
It has slashed its 2020 capital expenditure by 38% or $550 million, while also planning a $50 million reduction in this year’s cash production costs.
“Whilst the current oil price dynamic is challenging, the eventual recovery will create opportunities for companies positioned to act on them. Our strategy to leverage existing assets and infrastructure remains unchanged and we expect to pursue these exciting opportunities when conditions permit,” Gallagher added.
Santos expects its acquisition of ConocoPhillips’ northern Australia assets to complete in the first half of 2020. This transaction will give Santos operatorship of the Barossa project and control over Darwin LNG.
This post appeared first on Kallanish Energy News.