The tolling arrangements and secured offtake were critical commercial milestones on the path to the Barossa project taking financial investment decision in the first half of next year as backfill for the Darwin LNG plant when Bayu-Undan ceases production.
The long-term, binding supply and purchase agreement with a Japanese company for the Barossa field is good news for the Territory and Australian economies and locks in Darwin LNG’s future for decades to come.
Santos Managing Director and Chief Executive Officer Kevin Gallagher says the LNG Supply and Purchase (SPA) with Diamond Gas International, a wholly owned subsidiary of Mitsubishi Corporation, locked in the offtake of 1.5 million tonnes per annum of Santos equity LNG from Barossa for 10 years.
“Barossa is a globally-competitive, low cost brownfield LNG project providing new supply into a tightening LNG market, where JKM-based pricing is an increasingly deep, liquid and flexible marker for both sellers and buyers,” says Mr Gallagher.
“Santos is delighted to establish a longterm relationship with Mitsubishi, a major Japanese company with deep LNG expertise.”
Barossa, which lies 300 kilometres north of Darwin, would extend the life of Darwin LNG by at least 20 years and maintain hundreds of Northern Territory jobs. As the economy comes out of the covid-19 hibernation, the Barossa project will also importantly pump millions of dollars into the Territory economy in goods, services and wages every year.
In addition to the supply and purchase agreement, Santos and Mitsubishi Corporation have signed a memorandum of understanding to jointly investigate opportunities for carbon neutral LNG from Barossa.
These include collaborating on opportunities relating to Santos’ Moomba CCS project, pursuit of carbon neutral LNG, bilateral agreements for carbon credits and potential future development of zero emissions hydrogen.
Santos holds a 62.5 percent operated interest in the Barossa joint venture and is a joint venture partner and operator in Darwin LNG with a 68.4 percent interest.
Earlier in December, Santos announced an ambitious roadmap to net-zero emissions by 2040.
The new emissions targets, which are designed to support Australia’s commitment to the Paris Agreement, include a 26-30 per cent reduction in scope 1 and 2 emissions by 2030, and a commitment to actively work with customers to reduce their emissions.
“Our focus over the last three years on step-change technologies, such as carbon capture and storage, has enabled a pathway that allows us to go further faster when it comes to emissions reduction,” says Santos
Managing Director and Chief Executive Officer Kevin Gallagher. He says the company is already on track to exceed its existing 2025 emission targets.
“The world still relies on hydrocarbon fuels for 80 per cent of its primary energy, the same as 45 years ago, so to achieve global emissions reduction goals it is vital that companies like
Santos focus on making these fuels cleaner and eventually zero emissions.
“Through large-scale carbon capture and storage, world-leading nature-based offsets, increased use of renewables and energy efficiency projects, Santos will continue to be a leading clean fuels company at the forefront of the energy transition to a lower-carbon future.
“Importantly, we are articulating a roadmap to get there.
“Our targets and roadmap are consistent with our disciplined, low-cost operating model and our corporate strategy to build and grow around our five core natural gas assets across Australia, Papua New Guinea and Timor Leste.
“Carbon-neutral LNG cargoes are already in demand in Asia and customer countries, such as China, Japan and Korea, are aspiring to net-zero emissions around the middle of the century.
“This will require increased use of natural gas to replace coal as well as new clean fuels, such as hydrogen, already being used to reduce emissions from coal-fired power generation in Asia.
“Our existing LNG customer base in Asia will be the hydrogen customers of the future, and as technology evolves and they transition to new clean fuels, Santos will transition with them.
“In addition to reducing our own scope 1 and 2 emissions, Santos will work with our customers to reduce their scope 1 and 2 emissions by more than one million tonnes per year by 2030 through switching to cleaner fuels.”
Mr Gallagher says Santos has installed more than 5.5 megawatts of solar electricity and 4 megawatt hours of battery storage – but the real game-changer to reduce emissions is the Moomba carbon capture and storage project in South Australia.
Santos has successfully injected about 100 tonnes of carbon dioxide deep underground into depleted gas reservoirs as part of a final field trial for the project.
The project will safely and permanently store 1.7 million tonnes of carbon dioxide each year – the equivalent of taking about 700,000 cars off the road.
It will be the second largest and one of the lowest-cost projects in the world at an estimated cost of $30 per tonne.
Santos is fighting climate change in other ways. It has interests in two nature based registered with the Australian Clean Energy Regulator under the Emissions Reduction Fund.
One of the projects is a world-leading savanna-burning initiative in West Arnhem Land in the Territory.
It employs Indigenous rangers and is based on traditional Aboriginal fire management combined with modern science.
“The West Arnhem Land Fire Abatement project involves early dry season burning, which has been used for centuries to help prevent bigger, hotter and uncontrolled fires later in the season,” says Mr Gallagher.
“Santos is very excited about the potential to expand our interests in nature-based carbon abatement projects, generating additional carbon credits and also improving social, economic and environmental outcomes for Indigenous communities.”
Along with accelerated deployment of renewables, zero-emissions technologies for hydrocarbon fuels and for industries, such as power generation, cement and steel, may well provide the fastest, lowes tcost pathway to meet the world’s emissions reduction targets.
The acceleration of CCS technology at Moomba, combined with access to natural gas and solar resources, is also the fastest and most realistic path to a future hydrogen economy, at a price customer will be willing to pay. With huge potential for both CCS and nature-based carbon offsets, combined with a strong carbon reporting and accounting framework, and a robust Clean Energy Regulator, Australia and Santos are uniquely placed to offer reliable, zero-emissions energy products to Asian and domestic markets.