07 Jun 2012
SK E&S to fund up to US$520 million in carry obligations and contingent milestone payments
Santos today announced that it had entered into an agreement with ConocoPhillips and SK E&S (SK), an affiliate of South Korean conglomerate SK Group, to progress the development of the Caldita and Barossa gas discoveries located in the Timor Sea.
Prior to the agreement, Santos held a 40% interest in both discoveries, with operator ConocoPhillips holding the remaining 60%.
The terms of the agreement are as follows:
- SK will earn a 37.5% interest in Caldita and Barossa through a proportionate reduction by Santos and ConocoPhillips. ConocoPhillips will remain operator of both permits.
- SK will fund the first US$260 million of a three-well appraisal program, expected to begin in 2013. Following completion of the appraisal program, SK will have the option to increase its interest to 49.5% in exchange for a further payment of US$60 million to Santos and ConocoPhillips, shared according to their original interests in the permits.
- SK will fund up to US$90 million of pre-Front End Engineering and Design (pre-FEED) and FEED activities, expected to begin in 2014.
- SK will make FID and first LNG cargo payments of up to US$110 million to Santos and ConocoPhillips upon meeting certain milestones.
Santos Chief Executive Officer David Knox said he was very pleased to enter into an agreement with SK and ConocoPhillips aimed at commercialising Caldita and Barossa.
“Today’s agreement is another demonstration of the value inherent in Santos’ portfolio and is consistent with our strategy of building strategic partnerships to commercialise assets.”
“Santos has a quality portfolio of assets in the Timor Bonaparte, including Bayu Undan, Darwin LNG, Bonaparte LNG and Caldita Barossa, and last year we monetised our stake in Evans Shoal,” Mr Knox said.
Santos Vice President Western Australia and Northern Territory John Anderson said various development concepts for Caldita Barossa would be assessed during pre-FEED.
“We will look at the option of floating LNG as well as the possibility of a tie-back development to our existing LNG plant at Darwin, either as an expansion of those facilities, the back-filling of Bayu Undan when it comes off plateau or a combination of both,” he said.
The transaction is subject to customary consents and regulatory approvals.