The consortium led by oil and gas producer Santos (ASX:STO) has finally blinked and divested part of its stake in the Bayu-Undan upstream project in favour of Timor-Leste’s state energy company.
The news, announced in a statement on Tuesday, followed long, drawn-out negotiations. Some media reports claimed the Timor-Leste government had warned Santos it could lose control of the project if it did not agree to part with a share.
Santos’ statement followed one issued on 2 September, which outlined the deal, saying in part: “Santos today announces the Bayu-Undan Joint Venture (BUJV) and TIMOR GAP have agreed to terms of a Sale and Purchase Deed (SPD) to transfer a 16 per cent interest in the Bayu-Undan upstream project to TIMOR GAP, with an economic date of 1 July 2024. Execution of the SPD to effect this transaction is planned to occur in mid-September.”
Under the deal, the Bayu-Undan joint venture—comprising oil and gas majors Santos, SK E&S, Inpex, ENI, and Tokyo Timor Sea Resources—has now transferred a 16% stake to Timor GAP.
As a result, Santos’ share in the project has dropped from 43.4% to 36.5%.
Santos CEO Kevin Gallagher said the transaction demonstrated the company’s commitment to a long-term partnership with Timor-Leste.
The Bayu-Undan upstream project comprises an offshore petroleum field as well as offshore production and processing facilities in Timor-Leste. The project supplies gas to the Darwin LNG plant through a 500 km pipeline. Santos previously confirmed a seventh production-sharing contract extension up to 30 June 2027.
The project has provided more than US$25 billion in revenue for Timor-Leste over its lifetime. More than half the offshore workforce at Bayu-Undan is Timorese, with the project currently supporting about 350 onshore and offshore jobs in Timor-Leste. One hundred per cent of Santos’ workforce in Timor-Leste are locals.
Bayu-Undan continues to supply gas to the Australian domestic market via a Gas Sales Agreement with the Power and Water Corporation of the Northern Territory, as well as producing valuable liquids.