Santos approves $305m drilling program

Santos has approved a $US235 million ($A305 million) drilling program to extend the life of its Bayu-Undan field in the Timor Sea as a backfill to the Darwin LNG plant.

Adelaide's Santos, as operator of the Bayu-Undan joint venture, will complete the Phase 3C infill drilling program comprising three production wells (two platform and one subsea) and the development of additional natural gas and liquid reserves.

Drilling is scheduled for the current quarter, with production expected from March 30.

Managing director Kevin Gallagher said Phase 3C would produce more than 20 million barrels of oil equivalent (MMboe) at a low cost, “reducing the period that Darwin LNG is offline before the Barossa project comes on stream”.

The Barossa gas field sits 300 kilometres north of Darwin and will be the source of gas to backfill Darwin LNG when Bayu-Undan ceases production, Santos says.

Santos assumed operatorship of the Bayu-Undan JV when it completed the acquisition of ConocoPhillips’ Northern Territory and Timor-Leste assets in May last year.

That deal was worth about $US1.4 billion.

Santos now has around a 68 per cent interest in Bayu-Undan and Darwin LNG, which will reduce to 43 per cent upon completion of a 25 per cent sell-down to South Korean company SK E&S.

The sale is well progressed, Mr Gallagher says, with Santos having received approvals from the Bayu-Undan and Darwin LNG joint ventures and the Timor-Leste regulator.

Santos is now seeking Australian regulatory approvals.

Mr Gallagher said the sale to SK E&S would complete once a final investment decision is made for Barossa, expected in the first half of the calendar year.

Santos had deferred a FID for the $4.7 billion project and reduced its capital expenditure by $550 million in March last year, due to a weakened oil environment.

Its shares were down 1.5 per cent at 2:40pm AEDT to trade at $6.33.