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Santos and Mitsubishi sign SPA for Barossa LNG supply

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LNG Industry,

Santos has signed a binding long-term LNG supply and purchase agreement (SPA) with Diamond Gas International Pte Ltd (DGI), a wholly-owned subsidiary of Mitsubishi Corporation, for the supply of LNG from the Barossa project.

The long-term SPA is a contractual commitment for the supply and purchase of 1.5 million tpy of Santos equity LNG from Barossa for a period of 10 years with extension options, at a price based on the Platts Japan Korea Marker (JKM). Santos also has options to pursue further LNG transactions through commercial flexibilities negotiated with DGI.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said the agreement with DGI was another significant step towards a final investment decision (FID) on Barossa, which is targeted for 1H21.

“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.

“Santos is delighted to establish a long-term relationship with Mitsubishi, a major Japanese company with deep LNG expertise.

“The SPA delivers a firm LNG offtake arrangement which represents over 80% of Santos’ equity LNG volume from the Barossa project at our expected 50% interest level following the previously announced sell-down to JERA, while the JKM-indexation provides portfolio balance to our existing oil-linked LNG offtake agreements from GLNG and PNG LNG.

“It also represents the first Santos long-term equity LNG sale from one of our major LNG projects, demonstrating our marketing capability to meet customer needs in the market,” Gallagher said.

Executive Vice President, CEO, Natural Gas Group of Mitsubishi Jun Nishizawa said the agreement is a significant milestone for both companies and that it will create a mutually beneficial relationship which will canvas not only the LNG segment but also various other business opportunities including ESG initiatives going forward.

President and COO of DGI Gen Kunihiro said the agreement is a significant step towards strengthening the relationship between both companies and will contribute to DGI’s stronger presence in the market.

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