Final Bayu-Undan gas development approval
Santos Limited is set to formally join the world Liquefied Natural Gas (LNG) market and add more than three million barrels of oil equivalent to its annual production following signing of final approvals for the giant Bayu-Undan gas development by the Timor Sea Designated Authority.This project, involving Timor-Leste and Australia, will be the first cross-border LNG project in the region and the second LNG project in which Australia is involved, Managing Director, Mr John Ellice-Flint, said today.
It increases total revenue from the Bayu-Undan project (liquids and LNG) to over A$30 billion.
Santos is the only Australian company involved in this world-class project and the final approvals clear the way for the Company to make its first entry into the global LNG market,”
“This is a significant milestone for Santos and establishes LNG as a new cornerstone contributor to group revenue and earnings,” Mr Ellice-Flint said.
“Bayu-Undan is the ‘first of the new breed of company builders’ for Santos.
“It is testimony to the Company’s increasing success at diversifying our business to maximise shareholder value.
The approval also signals the start of an additional gas business for Santos in the Northern Territory and South East Asia.
The LNG development is the second stage of the Bayu-Undan project and is estimated to cost around US$1.5 billion.
The LNG stage is underpinned by a binding Heads of Agreement with The Tokyo Electric Power Company, Incorporated (TEPCO) and Tokyo Gas Co., Ltd. (TG) for three million tonnes per annum of LNG for 17 years, commencing in early 2006.
“The passage of the fiscal stability legislation by Timor-Leste and the approval of the gas development plan by the Designated Authority represents an unconditional approval and final investment decision for the project on terms that maintain an appropriate rate of return,” Mr Ellice-Flint said.
“These were the final regulatory hurdles to overcome so that the participants can now deliver a significant project for Timor-Leste, Australia and Santos.
The project’s first stage, the Gas Recycle (Liquids) Project, is due to come on stream in the first half of next year.
“For Santos, the combined Liquids and LNG projects will add over 6 million barrels of oil equivalent (mmboe) per annum at peak production. This is equivalent to approximately 10% of Santos’ 2002 production. It will also result in a 46 mmboe increase in proven reserves based on the new interests.”
ConocoPhillips will sell a participating interest in the Bayu Undan upstream development currently equivalent to a 10.08% unitised interest to TEPCO and TG. Under an equity realignment agreement Santos will sell a 1.19% interest, resulting in an ongoing holding of 10.64%.