Santos Energy has entered into an agreement with ConocoPhillips and SK E&S, an affiliate of South Korean conglomerate SK Group, to progress the development of the Caldita and Barossa gas discoveries in the Timor Sea.

Prior to the agreement, Santos held a 40% interest in both discoveries, with operator ConocoPhillips holding the remaining 60%.

The terms of the agreement are as follows: SK will earn a 37.5% interest in Caldita and Barossa through a proportionate reduction by Santos and ConocoPhillips, ConocoPhillips will remain operator of both permits; SK will fund the first $260 million of a three-well appraisal program, expected to begin in 2013; Following completion of the appraisal program, SK will have the option to increase its interest to 49.5% in exchange for a further payment of $60 million to Santos and ConocoPhillips, shared according to its original interests in the permits.

SK will fund up to $90 million of pre-front-end, engineering and design (pre-FEED) and FEED activities, expected to begin in 2014.

SK will make FID and first liquefied natural gas (LNG) cargo payments of up to $110 million to Santos and ConocoPhillips upon meeting certain milestones.