Using an unattributed slide from outside Santos' inhouse team, he explained that a Darwin LNG backfill from the Barossa field was cost competitive against most new projects, save Russia and an expansion of Qatar's huge North Field, including Australia. 

 

A new LNG plant in Australia would be more expensive than a PNG LNG expansion or the LNG plans under construction in West Africa, as well as pricier than DLNG. 

 

"If anybody was thinking of building new trains in Australia that's where that fits in," Gallgher grinned at the room. 

 

The only new train contender is Woodside's plans for a second train at its Pluto facility to take gas from the Scarborough field it shares 73.5%-26.5% with BHP. 

 

Before today's three and a half hour long investor briefing day Santos announced it had signed all necessary tolling agreements to send gas from the Barossa field as backfill to the Darwin LNG plant it took over operation of after its buy of ConocoPhillips Northern Australia assets completed earlier this year. 

 

"Our Darwin LNG joint venture partners voted to approve the toll agreement and the pipeline agreement to support the Barossa project. Thank you to all the partners for working so well with us," Gallagher said. 

 

"It's fantastic, it sets the term and toll for the next 15 years. It's a sustainable long life asset... Darwin is the lowest cost shipping in Australia and it's a hub for expansion...we have approval for two more trains...it's the right end of the cost curve, as we've always said."

 

It will still sell down 12.5% to partner Jera, which will come on FID. 

 

Third party gas tolling agreements and partner alignment have been the bane of Coleman's life for over two years now as he struggles to bring Woodside's Burrup Hub plans over the line.

 

BHP has no stake in Pluto so has always preferred sending gas to the six-partner North West Shelf facility Woodside operates, while Woodside wants to send gas from the 900-kilometre distant Browse fields as backfill for the five-train plant as it declines this decade.

 

Neither BHP or NWS partner Chevron Corporation have a stake in the fields, slowing tolling arrangements to the point where Coleman called them "tortuous" only months ago. 

 

The partner misalignment has been so problematic even WA premier Mark McGowan called for a resolution a year ago in parliament. Even before COVID-19, sanction for both projects, that would see the two facilities connected via a gas pipeline, was pushed back over misalignment. 

 

Scarborough now won't be sanctioned until the second half of next year and Browse "from 2023" according to Woodside in August. Santos delayed sanction of Barossa this year in March but now has a firm date. 

 

Though sanction is planned for the first half of next year, offtake contracts have been slow off the mark for the company, though Gallagher is adamant some amount of contracting will need to occur prior to FID. 

 

He wouldn't rule out a fixed price, saying "if it's high... (but) in a fluctuating market a fixed price is hard to agree. I think different indexations is more likely a means of sharing risk."

 

Some oil-linked contracts and some at the Japan-Korea Marker would be a good mix.

 

"I don't mind JKM pricing... but I'd want offtake, I'd want to know it can be lifted." 

 

He also said the former development model from ConocoPhillips forecast much higher CO2 emissions than what Santos plans now. 

 

"We are absolutely focussed on better outcomes for Barossa CO2 emissions. We've looked offshore. The FPSO can deliver very low emissions," he said.