Santos Ltd (ASX:STO) has signed a second memorandum of understanding (MOU) in as many months for potential gas supply from its proposed Narrabri project in New South Wales, this time with commercial explosives and chemicals producer Orica Ltd (ASX:ORI).
The non-binding agreement would see the parties negotiate domestic gas supply of up to 15 petajoules per year for a term of up to 10 years, subject to a final investment decision, a binding contract and regulatory approvals. The companies will also explore decarbonisation opportunities through Santos’ carbon management business.
The MOU follows a similar arrangement with Engie last month for up to 20 petajoules per year over at least a decade. Santos chief executive Kevin Gallagher said the agreements demonstrated “strong market interest in domestic gas supply from Narrabri.” He added: “There is overwhelming demand for Narrabri gas and Santos is looking to execute foundation contracts as soon as possible to support development once regulatory and native title processes are concluded.”
Santos committed Narrabri’s entire output to the domestic market in 2020, with appraisal wells already supplying the Wilga Park power station. Gallagher stressed the project’s strategic importance, calling for “state and federal governments putting our shoulders to the wheel and working together to make it happen.”
Narrabri could produce up to 150 terajoules of gas per day. Santos has invested more than A$1.5 billion since acquiring the asset in 2011. Shares in Santos closed at A$7.66, while Orica ended at A$20.95.