AUSTRALIA – American multinational energy corporation ConocoPhillips has agreed to sell its northern Australian business to partner Santos Ltd for $1.39 billion, in a deal that will hike the Australian group’s output by 25% and boost its position in the global gas market.
Reuters reported that the deal marks the second major acquisition by Santos in less than a year, following a sharp turnaround in its fortunes under Managing Director Kevin Gallagher.
ConocoPhillips, which has been recently increasingly focusing on its U.S. shale assets, will quit the Darwin LNG plant, which it opened in 2006, and gas fields off northern Australia.
The multinational energy corporation however said that it will hold on to its stake in the Australia Pacific LNG plant in Queensland state.
“While we believe the Darwin LNG backfill project remains among the lower cost of supply options for new global LNG supply, this transaction allows us to allocate capital to other projects,” ConocoPhillips Chief Operating Officer Matt Fox said in a statement.
The move also comes at a time when the Bayu-Undan gas field that feeds Darwin LNG is set to run dry in 2022.
Santos is aiming to develop the Barossa field at a cost of US$75 million to guarantee continuous supply to the Darwin LNG gas plant.
“The big prize here is pushing forward with development (of Barossa) and setting up the framework to develop other resources in the region over time,” Gallagher told reporters on a conference call.
The deal gives Santos control over the future of Darwin LNG, the second oldest of Australia’s 10 LNG plants, at a time when it is vying against several LNG projects worldwide to line up gas buyers to extend its life.
Santos however said that it aims to cut down its stakes in Darwin LNG and Barossa to about 40%-50% and that it has already reached a preliminary agreement to sell down a 25% stake in Darwin LNG to its Barossa partner SK E&S of South Korea.
It was also in talks with other Darwin LNG partners, which include Japan’s Inpex Corp, Italy’s Eni SpA, Japan’s JERA and Tokyo Gas, to sell equity in Barossa and Darwin LNG.