Oil producer Santos is planning to hold talks with the PNG government this week about its $21bn merger with Oil Search, sources say.
Santos and Oil Search last week signed their merger deal that creates one of the world’s largest energy companies. The former will own 61.5 per cent and the later will have 38.5 per cent.
However, the PNG government had earlier indicated it had objections to the transaction and its approval is needed for the deal to proceed.
Oil Search and Santos own 29 per cent and 13.5 per cent stakes respectively in the PNG LNG project, while Oil Search also holds a 22.8 per cent share in Papua LNG.
Last week, The Australian reported that PNG Deputy Prime Minister Sam Basil said some of the government’s concerns had included the weakening of any Papua New Guinean shareholders or shareholder interests, reduction in market liquidity, potential for job losses, potential delisting from the PNG stock exchange and loss of local ownership of the company assets to a foreign interest.
The most logical move by Santos to appease the PNG government is for a second Santos listing in PNG, according to industry experts.
Oil Search has been listed in both PNG and Australia and has 5000 local shareholders, its biggest locally listed company on the stock exchange.
Mr Basil had earlier said that the market capitalisation of the PNG stock exchange would fall by a third if Oil Search delisted.
The Santos and Oil Search merger was struck as part of a global trend of consolidation in the industry, which increasingly is facing up to the pressure from lenders and equity investors that are finding oil companies unappealing with climate change squarely on the agenda.
Petroleum groups are needing to create more of their own financial fire power to fund projects rather than being so heavily reliant on other sources.
This deal could create annual cost savings of between $US90m and $US115m ($121m-$155m) for the Kevin Gallagher-led business.
The merger is happening at a time when BHP has also agreed to sell Woodside Petroleum its petroleum unit in a scrip transaction that valued the division at about $18.5bn when it was announced.
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