Kumul Petroleum’s Wapu Sonk says PNG makes Santos attractive to Woodside
Papua New Guinea’s national petroleum company says greater access to the country’s vast oil and gas reserves makes a potential merger with Santos attractive for Woodside Energy.
Papua New Guinea’s national petroleum company says greater access to the country’s vast oil and gas reserves makes a potential $80bn merger with Santos attractive for Woodside Energy, signalling early support should the bumper buyout proceed.
Kumul Petroleum managing director Wapu Sonk said that while plans for the merger between Australia’s two largest oil and gas companies remain in their early stages, he was not concerned that PNG would take a back seat in the enlarged energy giant two years after Santos absorbed local entity Oil Search.
He added that he expected that, much like the merger between Santos and Oil Search, a combined Woodside-Santos would continue to function as normal in PNG.
“We know Woodside is targeting PNG assets because that’s the growth area, that’s the best asset on Santos’ books,” he told The Australian on the sidelines of the PNG Chamber of Resources and Energy conference in Sydney.
“If the Oil Search and Santos merger is anything to go by, it would be the same, with Woodside taking over Santos and PNG being left alone.
“I’m not really concerned or apprehensive or whatever you want to call it – I see it as being the same.”
Santos executive vice-president, Australia and PNG, Oil Brett Darley was tight-lipped on what the $80bn deal would mean for PNG.
“There’s nothing more I can add to what was released last week,” he said at the conference.
“Santos is always looking to unlock value for shareholders. That’s its job, and ultimately any discussions don’t guarantee any deal going ahead. So that’s where it is, and the market will be kept up to date,” he said.
Kumul Petroleum has a longstanding partnership with Santos, and in September struck a deal with the ASX-listed group to acquire a $576m or 2.6 per cent interest in PNG LNG. The agreement also includes the option to purchase a further 2.4 per cent stake next year.
Santos took over Oil Search two years ago this week, and Mr Sonk said that the merger had been a success for PNG, resulting in more jobs being created.
“No Papua New Guineans lost their job. In fact (jobs) increased and brought more expertise back into PNG. It’s getting more focused. So actually, it was a success,” he said.
A source told The Australian that Woodside had long admired Santos’s Papua New Guinea LNG assets, but was wary of the South Australian producer’s coal-seam gas and high-emissions-intensity Barossa and Cooper Basin assets.
Woodside was foiled in 2015 after it lobbed a $12bn deal for Oil Search, now owned by Santos, with the West Australian company eager to grab a share of its exposure to PNG.
Mr Darley said PNG was playing a more important role for the company as Australia’s position as a leading and trusted gas supplier declined because of a backlash from a “vocal minority”.
“The enormous resource base in PNG has meant the country is a reliable provider of low-cost LNG to Asian markets. And at Santos, our intent is to keep it that way with continued investment in this nation,” he said.
“There’s no hiding from the fact that there are challenges around regulatory approvals here in Australia. Although our sector provides essential services and immeasurable benefits to people who need it most, the agendas of the vocal minority are risking the destruction of the entire industry, complete with the destruction of thousands of jobs.”
Mr Darley said as a result it was prioritising investments in supportive regulatory jurisdictions such as PNG.
“PNG continues to be the key to our diverse portfolio. Now more than ever, our strategic decisions about sovereign risk and future growth opportunities are being considered in the light of the jurisdictional support,” he said.
Woodside and Santos over the weekend opened a virtual dataroom ahead of several weeks of due diligence.
The major issue will be what premium is offered in a scrip-based merger – and whether Santos shareholders, already on the warpath over the company’s market valuation, will be prepared to accept a so-called “skinny premium” deal.
It is thought that merger talks could involve a break-up of Santos with the GLNG gas export project in Queensland potentially being bought by Gina Rinehart’s Senex Energy, while fellow Adelaide producer Beach Energy could acquire Santos’s Cooper Basin and West Australian assets.
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