The Santos Ltd (ASX: STO) share price is on the move on Tuesday morning.
In morning trade, the energy producer's shares are up 1% to $7.28.
Why is the Santos share price on the move?
Investors have been buying Santos shares after it announced a final investment decision (FID) on the Barossa joint venture, located offshore the Northern Territory.
According to the release, Santos has made its FID and will proceed with the US$3.6 billion gas and condensate project.
In addition to this, the Barossa FID kick-starts the US$600 million investment in the Darwin LNG life extension and pipeline tie-in projects. These will extend the facility's life for around 20 years. The Santos-operated Darwin LNG plant has the capacity to produce approximately 3.7 million tonnes of LNG per annum.
What is Barossa?
The company notes that Barossa is one of the lowest cost, new LNG supply projects in the world. It expects the project to give Santos and Darwin LNG a competitive advantage in a tightening global LNG market.
The project also represents the biggest investment in Australia's oil and gas sector in almost a decade.
Santos' Managing Director and Chief Executive Officer, Kevin Gallagher, believes the FID is consistent with Santos' strategy for disciplined growth utilising existing infrastructure around its core assets.
He commented: "Our strategy to grow around our five core asset hubs has not changed since 2016. As we enter this next growth phase, we will remain disciplined in managing our major project costs, consistent with our low-cost operating model."
"As the economy re-emerges from the COVID-19 lockdowns, these job-creating and sustaining projects are critical for Australia, also unlocking new business opportunities and export income for the nation. The Barossa and Darwin life extension projects are good for the economy and good for local jobs and business opportunities in the Northern Territory," he added.
The Barossa and Darwin LNG life extension projects are expected to create 600 jobs throughout the construction phase. After which, they are expected to secure 350 jobs for the next 20 years of production at the Darwin LNG facility.
Carbon neutral plans
Santos has also revealed that it has signed a memorandum of understanding with joint venture partner SK E&S and Mitsubishi to investigate opportunities for carbon-neutral LNG from Barossa.
This includes a collaboration relating to Santos' Moomba CCS project, bilateral agreements for carbon credits, and potential future development of zero-emissions hydrogen.
"We will continue to explore the potential for carbon-neutral LNG from Barossa as part of our commitment to lower global emissions and as a company, reach our net-zero emissions target by 2040," Mr Gallagher said.
What now?
The Barossa FID is the final condition required for completion of the 25% equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S.
Completion of the SK transaction is expected to occur at the end of April and result in net funds to Santos of approximately US$200 million. This represents the sale price of US$390 million less the forecast cashflows from the 25% interests from the effective date of 1 October 2019 to completion.
In addition, Santos and JERA continue to progress their binding sale and purchase agreement for JERA to acquire a 12.5% interest in Barossa.
Should everything go to plan, Santos will see its interests in Bayu-Undan and Darwin LNG change to 43.4%, and in the Barossa project to 50%.
