PNG’s Kumul nears stake deal with Santos

After being forced to twice extend its exclusive rights period to buy a 5 per cent stake in Papua LNG, the state-owned company’s boss says the deal is finally close.

Kumul Petroleum’s protracted ownership play is nearing its conclusion.

Kumul Petroleum is on course to complete its $US1.4bn ($2.1bn) acquisition of a 5 per cent stake in PNG LNG by the end of the year, the head of its national petroleum and energy company said, ending a protracted saga that had stirred market concern.

In May, Kumul Petroleum delayed for a second time its deal with Santos to line up funding. The exclusivity period is now set to expire on August 31.

Wapu Sonk, managing director of Kumul Petroleum, said the deal will close by the end of the year.

“We have made significant progress but not necessarily closing out the transaction by the end of the month. We were always going to close out the transaction by the end of the year. The paperwork will follow but enough progress has been made for an announcement by the end of the month,” Mr Sonk told The Australian.

After the acquisition, the PNG state will own 22 per cent of PNG LNG, while Santos’ shareholding would fall to 37.5 per cent. It would remain the largest investor in the project.

The mooted sale was part of the arrangements agreed with PNG Prime Minister James Marape when Santos acquired Oil Search in 2021.

The merger saw Santos become PNG LNG’s largest shareholder, increasing its 13.5 per cent stake to 42.5 per cent. ExxonMobil operates the project and owns a 33 per cent of the equity.

The acquisition of Kumul Petroleum’s additional 5 per cent stake is a key pillar in PNG’s ambition to boost the development of its resource sector for the benefit of the nation.

The plan is also underpinned by a second mooted LNG facility in PNG, the $US10bn Papua LNG project that the Pacific island country believes will have a transformative effect on its impoverished economy.

Kumul has acquired a 2 per cent stake in the development. Should the lead consortium of TotalEnergies, Santos and ExxonMobil progress to the final investment decision – Kumul as the PNG representative will own 22.5 per cent of the project.

Mr Sonk said a final investment decision on the project would occur in the first quarter of 2024, but said he was confident the project would receive the green light.

“Every indication is that we will reach FID in the first quarter of next year and then construction will begin,” Mr Sonk told The Australian.

Further gas development could happen, and the P’nyang gas field – which has seen several false dawns – could finally be developed.

ExxonMobil and its partners last year struck a deal with the PNG government to develop the P’nyang gas field, ending years of uncertainty about a key part of a $20bn LNG expansion project that had stalled amid a row over terms.

Exxon had hoped to expand the P’nyang gas field to supply an expansion of its PNG LNG venture, but months of talks failed to reach an agreement and negotiations broke down in early 2020.

The PNG government said ExxonMobil would offload a 12 per cent stake in the venture “at fair market price” to PNG parties, the bulk of which will go to Western Province and landowners.

Mr Sonk said he was confident the development would materialise after the Papua LNG facility.

“P‘nyang will get done as well. On the PNG LNG project side, all those fields would then be on the decline and to maintain production that we expect – we need new fields. The only one that is ready to go is P’nyang,” said Mr Sonk.

Originally published as PNG’s Kumul nears stake deal with Santos