Santos snaps up 14pc stake in P’nyang gas field for $270m
Santos has inked a $270m deal that boosts its exposure to a planned $20bn LNG expansion in PNG.
Santos has boosted its exposure to a planned $US14 billion ($20.2bn) LNG expansion in Papua New Guinea after signing a deal to pay $US187 million ($270m) for a 14.3 per cent stake in the P’nyang gas field.
The long awaited deal marks a further step in plans led by Oil Search, ExxonMobil and France’s Total to double LNG output from the Pacific nation by 2024.
The P’nyang field will supply one of three planned 2.7m tonne LNG trains which will be added to the existing PNG LNG facility at Port Moresby which produces about 8.5m tonnes annually.
The other two trains will be underpinned by gas from the Elk-Antelope fields which form the Papua LNG venture led by Total.
The binding letter of intent roughly aligns Santos’ (STO) position in the expansion project with its 13.5 per cent stake in the foundation PNG LNG project.
Oil Search (OSH) and Exxon now own a 36.8 per cent stake in the 4.4 trillion cubic feet gas P’nyang resource with Japan’s JX Nippon just under 12 per cent.
The project stakes will change again when the PNG government takes up its right to a share of the project given it already holds a 16.8 per cent interest in PNG LNG.
“The arrangements we announce today mark an important step towards the proposed expansion at the PNG LNG plant via a 2.7m tonne third LNG train fed by existing project resources and P’nyang,” Santos chief executive Kevin Gallagher said.
After signing a gas agreement with the PNG government last month for Papua LNG, Oil Search is now looking to sign a similar pact with the nation this quarter which will kickstart initial engineering and design work on the overall expansion later this year.
“By using existing PNG LNG Project infrastructure and access to one of the proposed new LNG trains, capital investment for the P’nyang field will be minimised and operating costs reduced materially over its 30-plus year operating life, benefiting all stakeholders,” Oil Search managing director Peter Botten said in a separate statement.
Santos will pay $US120m ($173m) by the end of June once a sale and purchase agreement has been sealed and the reminder in instalments subject to a production development licence and final investment decision due in 2020.
The pending deal follows a leaked Ombudsman’s Commission report yesterday clouding the future of PNG’s under pressure Prime Minister Peter O’Neill over claims he engaged in improper conduct relating to the $1.23bn UBS loan to buy shares in Oil Search in late 2014.
At 10.30am (AEST), shares in Santos had lifted 12.5 cents, or 1.75 per cent, to $7.255.
