SK E&S to invest $1.4 bn in Australia LNG project

SK E&S Co. will invest $1.4 billion in a gas field development project offshore northern Australia that had been postponed due to the global pandemic.

The South Korean energy company said on Mar. 30 that a 10-year study found that the Barossa and Caldita fields are estimated to have at least 70 million tons of natural gas reserves, more than twice the earlier projection and about a two-year supply for South Korea.

In 2012, SK E&S acquired a 37.5% share in the gas fields off the northwestern coast of Australia, and is currently operating the project together with the other shareholders – Australia's oil and gas company Santos Corp. and ConocoPhillips Corp., a US crude oil producer.

Earlier in the day, Santos made a final investment decision to proceed with the $3.7 billion development.

SK's investment in the Barossa and Caldita fields will be equivalent to its stake in the project. Once they begin commercial operations in 2025, SK will ship 1.3 million tons of LNG per year from the fields to South Korea over a 20-year period. 

Then it will use part of the imported LNG to develop hydrogen fuel at its hydrogen-generation plant under construction in South Chungcheong Province, after removing carbon dioxide from the natural gas. The remaining LNG will be used to power its two natural gas plants in the country. 

The reserves in the Australian gas fields could be larger than the current estimation, including other areas still in the appraisal stages, the South Korean company added.

SK E&S has been expanding across the LNG supply chain from exploration, production and transportation of LNG to power generation, along with diversification of energy sources. It is the country's largest city gas supplier.

The Australian gas development project will guarantee a long-term supply of LNG, a source for hydrogen production, at a competitive price, SK E&S Chief Executive Choo Hyeong-wook said in a statement.