SK Innovation E&S's 14-Year Barossa Gas Field Project Becomes a New Pillar in the LNG Supply Chain

From Development to Liquefaction, Transportation, and Supply at the Barossa Gas Field
Securing 1.3 Million Tons Annually... Building a Non-Middle East Supply Chain

Connecting Production Bases in Australia and North America with Four In-House LNG Carriers
Expanding Overseas Power Businesses in Vietnam and Beyond, Leveraging a 20-Year Supply Base

SK Innovation E&S is accelerating the expansion of its liquefied natural gas (LNG) supply chain based on the Barossa Gas Field in Australia, following 14 years of investment. The company has secured an annual volume of approximately 1.3 million tons of LNG from the Barossa Gas Field for the next 20 years and is expanding its customer base to Asian markets such as Vietnam. SK Innovation E&S is pursuing a strategy to respond to international energy market price fluctuations and supply disruptions by directly participating in an integrated value chain that covers gas field development, LNG liquefaction, transportation, and power generation.

On September 29 (local time), SK Innovation E&S held a business briefing in Darwin, Australia, to announce its achievements in the Barossa Gas Field development and to unveil its global LNG value chain expansion strategy. SK Innovation E&S is the first domestic private company to participate directly in the entire LNG value chain. The process encompasses producing natural gas from the gas field, liquefying it at an LNG plant, transporting it directly, and supplying it to end-users such as power plants and industrial facilities.

Kim Hyunjun, Technical Advisor of the LNG Business Division at SK Innovation E&S, is explaining the development status of the Barossa gas field at a business briefing held in Darwin, Australia on the 29th (local time). Photo by Jang Bokyung

The Barossa Gas Field, which began full-scale production this year, serves as the core production base of the company’s value chain. Located about 380 kilometers offshore north of Darwin, Australia, it holds an estimated 3.4 trillion cubic feet (Tcf) of natural gas reserves. The field is also estimated to contain roughly 51 million barrels of condensate. The ownership structure consists of Santos, the operator in Australia, with 50%, SK Innovation E&S with 37.5%, and JERA from Japan with 12.5%.

SK Innovation E&S has been engaged in the Barossa Gas Field project since 2012, carrying out exploration, assessment, permitting, and development over roughly 14 years. Initially, the field was not regarded as highly commercially viable. However, by drilling additional appraisal wells, the company was able to expand the reserves to almost three times the original estimate, enabling the transition to a large-scale LNG production project.

Kim Hyunjun, Technical Advisor of SK Innovation E&S LNG Business Division, explained, "When we acquired the Barossa Gas Field asset in June 2012, it was assessed to allow only small-scale LNG production. Subsequently, by drilling five additional appraisal wells, we increased the reserves to nearly three times the initial estimate, securing commercially viable reserves for full-scale development."

The LNG value chain extends through the entire process from gas field exploration and development to liquefaction, transportation, regasification, and final consumption such as power generation and heating. SK Innovation

The company secured the business foundation from production to liquefaction by acquiring a stake in the Darwin LNG terminal in 2020. In March 2021, it made its final investment decision (FID) and commenced full-scale development. The total development investment decided at that time was about 4.3 billion dollars, of which SK Innovation E&S’s share amounts to approximately 1.6 billion dollars.

This 14-year investment came to fruition with the first LNG production at the end of last year. Production began in December last year, the first LNG carrier departed in January this year, and in February, SK Innovation E&S’s LNG carrier "Prism Agility" delivered the first LNG batch to the Boryeong LNG Terminal in Chungnam. In August, approximately 300,000 barrels of condensate produced at the Barossa Gas Field were supplied to SK Incheon Petrochem.

The annual LNG volume allocated to SK Innovation E&S from the Barossa Project amounts to around 1.3 million tons. This is equivalent to about 3% of Korea’s annual LNG import volume. SK Innovation E&S estimates it will secure a total of 26 million tons of LNG over the 20-year expected production period of the gas field.

Floating Production Storage and Offloading (FPSO) facility of the Barossa gas field in Australia. It processes natural gas produced at the subsea production well and sends it to the Darwin LNG terminal via subsea pipelines. SK Innovation

Instead of building new facilities, costs were reduced by utilizing existing infrastructure. Natural gas produced at the Barossa Gas Field is processed via a floating production storage and offloading (FPSO) facility and transported through an approximately 380-kilometer subsea pipeline to the Darwin LNG terminal. The terminal, in operation since 2006 for liquefying natural gas from the Bayu-Undan Gas Field, was converted for Barossa Gas by refurbishing equipment after the prior gas field's production ended.

SK Innovation E&S plans to further enhance its competitiveness in the global LNG value chain, leveraging the development of the Barossa Gas Field. The company has established a business structure connecting production bases such as Barossa in Australia and the Woodford Gas Field in the United States, Darwin and Freeport LNG terminals, four company-owned LNG carriers, and domestic power plants.

The core of this business structure is the company’s ability to flexibly respond to market fluctuations by combining various supply sources and demand points. Even if issues arise at a particular gas field or along a transport route, the company can substitute volumes from other sources. Utilizing its own vessels also partially mitigates international LNG shipping charter rate surges.

Natural gas production and transportation structure of the Barossa gas field in Australia. SK Innovation

The annual 1.3 million tons secured from Barossa will also replace existing LNG purchase volumes. SK Innovation E&S currently operates an LNG demand portfolio of about 6 million tons per year. Since it utilizes a combination of long-term contracts, the company’s own gas field output, and spot market purchases, an increase in production from Barossa will enable the company to reduce reliance on purchases from the more price-volatile spot market.

Kang Ryungkwon, Head of Management Planning at SK Innovation E&S, stated, "The 1.3 million tons are included in our total annual demand of 6 million tons. The addition of new supply will further reduce our dependence on the spot market, resulting in a greater impact."

SK Innovation E&S is also pursuing overseas LNG demand sources beyond its domestic power business. One notable project is the Quang Ninh LNG project in Vietnam. The initiative aims not only to supply LNG as fuel for power generation but also to tie in the development of surrounding industrial complexes, job creation, and talent nurturing around the power plant.

The company sees the rise in power demand driven by the expansion of artificial intelligence (AI) data centers and the semiconductor industry as new business opportunities. SK Innovation E&S is currently promoting a combined heat and power (CHP) business in the Yongin Semiconductor Cluster. This project is operated as a joint venture with Korea Midland Power, supplying electricity to Korea Electric Power Corporation and heat to SK hynix.

This content was produced with the assistance of AI translation services.