PERTH (miningweekly.com) – Australian oil and gas major Santos has inked additional nonbinding memoranda of understanding (MoUs) for gas supply from its proposed Narrabri gas project, in New South Wales.

Under the proposed transactions, Santos would supply building material manufacturer Brickworks with up to 3 PJ/y of natural gas from Narrabri for seven years from 2025, and it would supply specialist gas retailer Weston Energy with 10 PJ/y, for a period of ten years from 2023.

The supply of Narrabri gas was subject to a final investment decision, negotiation and execution of a definitive gas supply agreement and approvals by each party, Santos said on Thursday.

Santos has previously signed nonbinding Narrabri gas supply agreement with Perdaman for a proposed new fertiliser plant at Narrabri, creating a new local industry. Santos would supply some 14.5 PJ/y of natural gas to Perdaman over a period of 20 years.

Santos MD and CEO Kevin Gallagher said manufacturers on the east coast were crying out for more gas supply and more competition, which would put downward pressure on gas prices.

“We have committed 100% of Narrabri gas to the domestic market, enough to supply up to half of New South Wales’ needs and help support about 300 000 jobs in New South Wales that rely on natural gas,” Gallagher said.

“In Sydney, and throughout regional New South Wales, customers understand the benefits of a local, reliable, competitively-priced natural gas supply just a few hundred kilometres away in Narrabri. Narrabri gas will be very competitively priced because we will bring to Narrabri the safe, low cost operating model that we have successfully implemented in Queensland.

“Gas from Narrabri will always be cheaper than gas imported from other states or from overseas.”

Gallagher noted that Santos had spent more than A$500-million on the Narrabri gas project since acquiring Eastern Star in 2011. 

“We have a proven record of developing coal seam gas resources safely and without harm to the environment or water resources, and a development consent decision is now a matter for the New South Wales Independent Planning Commission,” Gallagher said.

Santos is on track to supply more than 70 PJ/y of natural gas to the east coast domestic gas market this year, approximately 14% of total demand.

Meanwhile, Santos on Thursday announced the award of a subsea production system (SPS) contract at the Barossa project, strengthening its position as the leading candidate for the Darwin liquefied natural gas (LNG) backfill.

The engineering, procurement and construction (EPC) contract represented a commitment to long-lead items in advance of a final investment decision, which is due in early 2020.

“This is the first EPC contract to be awarded for Barossa and a big vote of confidence in its position as the leading project to backfill Darwin LNG,” said Gallagher.

“We’re making good progress in the front-end engineering and design phase, including the evaluation of bids for the gas export pipeline.”

Barossa’s successful development will more than double Santos’ Northern Australia production based on its higher equity position in the project, with the company holding a 25% interest.

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