Dorado Oil Project Stalls as Santos Opts Against FPSO Purchase -- 2nd Update

By David Winning

SYDNEY--One of the largest new oil developments in Australia is effectively on hold after majority owner Santos decided not to begin preliminary engineering work or advance a deal to buy a vessel to pump and store crude on site.

Carnarvon Energy outlined the status of the Dorado oil project in Western Australia's Bedout Basin to investors Tuesday after being informed by Santos of its decision. Santos owns 80% of the venture, with Carnarvon and a unit of Taiwan's CPC Corp. each owning 10%.

Carnarvon said Santos, which is Dorado's operator, had decided not to purchase a floating production storage and offloading vessel, or FPSO, that was an option for the first phase of the Dorado project. Santos also won't begin front-end engineering and design work at this stage.

The venture had been considering deploying an FPSO vessel capable of processing between 75,000 and 100,000 barrels of oil per day.

A spokesperson for Santos said the company continues to have confidence in Dorado and other assets in the Bedout Basin, and it is committed to extracting maximum value from them.

"After a detailed assessment of all relevant factors, Santos recommended to the joint venture that the development concept for Dorado be revisited after further evaluation of Bedout Basin resources," the spokesperson said.

Dorado was largest oil discovery made on Western Australia's North West Shelf in three decades when it was discovered in 2018, Carnarvon says on its website. It estimates the field holds some 162 million barrels of light oil and condensate when measured on a proven, probable and a contingent basis. Dorado also contains a large amount of natural gas.

Santos revised its capital allocation framework in November and aims to return at least 60% of free cash flow to shareholders from 2026. The energy company said spending on projects that could support its GLNG export facility in eastern Australia and the PNG LNG plant in Papua New Guinea would get priority in future.

Some analysts interpreted that announcement as signaling a delay to Dorado, which had been set for a final investment decision this year. Among them was Goldman Sachs, which speculated that Dorado could be developed over 2027-2030.

Carnarvon confirmed the venture now won't make a decision on whether to construct the Dorado project this year. "Given the quality of the Dorado project, we at Carnarvon are disappointed by this latest deferral to the project," Chief Executive Philip Huizenga said.

Write to David Winning at [e-mail]

(END) Dow Jones Newswires

01-20-25 2225ET