Australian giant Santos is asking for 2b worth of Nordic gas resources
Santos boss Kevin Gallagher says gas has a great future as the company makes a $ 2.2 billion deal to buy several parts of northern Australia from international oil and gas company ConocoPhillips.
Investors at the South Australian headquarters natural gas producer welcomed the deal and raised 5.7 per cent to close at $ 7.85, the highest closing price since May 2015.
ConocoPhillips is the operator and majority owner of the Darwin Liquefied Petroleum Gas (LNG) plant and the Bayu-Undan offshore field supplying the Darwin plant. Santos currently holds 11.5 percent of the shares in each.
It also owns 37.5 percent of Barossa's development, which Santos hopes will replace Bayu-Undan with gas in the future. Santos currently owns 25 percent of the development.
Santos and ConocoPhillips have a long-standing business relationship, as the latter has been managing Santos' natural gas reserves in Northern Australia for several years.
A transaction that requires regulatory approval would see ConocoPhillips cease all of its operations in northern Australia. However, this would not affect its investment in a LNG plant in Queensland.
The acquisition of these assets is fully in line with Santos' growth strategy to build on existing infrastructure positions, while furthering our goal of being a leading regional supplier of LNG facilities, Gallagher said.
This acquisition will ensure the strategic management and administration of LNG infrastructure in Darwin, with valid approvals to support expansion to 10 million tonnes per year and a low-cost, long-lived Barossa gas project.
These assets are well known to Santos. It will also continue to strengthen our knowledge and capabilities in offshore operations and development to drive growth in the high seas of North and Western Australia.
ConocoPhillips said the assets produced about 50,000 barrels of oil equivalent (boe) per day in the first half of 2019, while proven reserves at the end of 2018 were about 39 million boe.
We are pleased that Santos recognizes the value of the existing company and the opportunity to develop Barossa and thereby continue to produce Darwin's liquefied natural gas for another 20 years or more, said Matt Fox, Chief Operating Officer of ConocoPhillipss.
Although we believe the Darwin LNG return project will be one of the lower costs of the new LNG supply options, the transaction will allow capital to be allocated to other projects that we believe will provide ConocoPhillips with the highest long-term value, he said.
It will also gradually improve the quality of your pay. This will further diversify the business, which is already extremely diverse in terms of the geographical weight it serves.
Strategically, it makes a lot of sense, financially it makes a lot of sense, and progress puts them in a position where they can control the structure of their participation in this and other projects, he said.