Oil giants queue for Santos’ Pikka

Brent crude oil has been trading at over $US100 a barrel ever since the Russia invasion on its neighbour early this year.

Major oil and gas producers from North America are believed to be lining up in the sale process for a stake in the Alaska-based Pikka project, on the market by Santos at a time when energy security remains in sharp focus.

In the process of the Moelis-advised competition are understood to be major US energy heavyweights like ConocoPhillips, Exxon and Chevron.

The groups are rallying to buy more assets in their own region only months after fossil fuels were on the black list by many investors.

But this has all changed amid a threat of war following Russia’s invasion of Ukraine and heavy sanctions placed on Russia that prevent the buying of its gas.

Brent crude oil has been trading at over $US100 a barrel ever since the Russia invasion on its neighbour early this year.

The situation is one that has prompted Santos to consider holding off on a selldown on its stake in PNG LNG, say sources.

After carrying out a $21bn merger last year with Oil Search, Santos is moving to sell the Alaska-based Pikka project it inherited from its rival.

It now owns a 51 per cent interest in that project through its merger with Oil Search and the project was earlier estimated to be worth between $US1.5bn and $US2bn.

But it may now sell for a higher price, given that such assets are in strong demand.

Repsol owns the remainder and both owners had earlier been hoping to reduce their interests by about 15 per cent.

Some have believed that Santos would be keen to sell the entire operation because of the geographic distance from the rest of its assets in Australia and PNG.

ConocoPhillips has been seen as the standout candidate to buy the asset, as it would have the most synergies, with an asset that it operates right next door, and it is the state’s largest oil and gas producer.

But now its peers are looking as well, say sources.

Meanwhile, some believe the Australian energy giant may now be giving thought as to whether it does sell down part of its stake in the PNG liquefied natural gas project, as earlier expected.

With the oil price so high, PNG LNG is now generating strong cashflow, which Santos would want to retain.

Another possibility is that a sale is delayed.

Total is the operator of the other major PNG project, Papua LNG, which is linked to PNG LNG, and has always been considered the most logical buyer.

Expectations have been that Santos would look to sell down about 10 per cent or 15 per cent in the asset.