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UPDATE 1-Australia's Santos inks deal to supply LNG to Mitsubishi unit from Barossa

(Adds Barossa project context, comments)

Dec 7 (Reuters) - Australia’s no. 2 independent gas producer Santos Ltd said on Monday it signed a 10-year agreement to supply liquefied natural gas (LNG) from its Barossa project to a unit of Japan’s Mitsubishi Corp.

Santos will supply Diamond Gas International 1.5 million tonnes of LNG from the Northern Territory project for an initial ten years with options for further LNG transactions.

The agreement is a significant step in reaching a final investment decision for the gas project, which is expected by the first half of 2021, Santos added.

The supply deal represents the company’s first long-term LNG sale from one of its major LNG projects, Chief Executive Kevin Gallagher said.

“The SPA delivers a firm LNG offtake arrangement which represents over 80% of Santos’ equity LNG volume from the Barossa project at our expected 50% interest level,” he added.

The Adelaide-based firm in March deferred an investment decision on the project after oil prices plunged amid coronavirus-driven lockdowns.

The two companies also inked an agreement to jointly consider opportunities for carbon neutral LNG from Barossa. (Reporting by Arpit Nayak in Bengaluru; editing by Diane Craft and Sam Holmes)

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