PNG issues LNG development demand to Santos’ deep-pocketed Middle East suitor ADNOC

The boss of PNG’s national petroleum company says Abu Dhabi must commit to develop the $US18bn Papua LNG project should it buy Santos.

PNG LNG, which is part-owned by Santos.

The boss of PNG’s national petroleum company says Abu Dhabi must commit to develop the $US18bn ($28bn) Papua LNG project should its blockbuster takeover for Santos proceed, ahead of a final investment decision looming in December.

The demand marks the first major intervention by a stakeholder since the Middle East ADNOC-led consortium lobbed its $30bn buyout bid on Monday, underscoring the delicate political atmosphere attached to the deal in the Pacific nation.

Santos owns nearly 23 per cent of the proposed second LNG ­facility in PNG, a project backed by the Marape government as it pushes for a next wave of major gas exports to replicate the success of the country’s foundation PNG LNG plant.

“It would be one of those things that the government of Papua New Guinea will be concerned about, whether the new owners will be committed to Papua LNG specifically. Because the final investment decision is only a few months away,” Wapu Sonk, managing director of PNG’s national oil company, Kumul Petroleum, told The Australian.

“We would need to see from them what Santos did, which is to meet national interest requirements.”

Santos’s own $21bn merger with Oil Search in 2022 faced a major threat after the PNG government demanded better terms and warned that aspects of the deal could fail a national interest test.

The Papua LNG project has been delayed several times and suffered a major cost blowout, but energy officials in Port Moresby are confident the combination of partners TotalEnergies, ExxonMobil and Santos will result in a facility getting the go-ahead.

Kumul has acquired a 2 per cent stake in the development and, should the lead consortium progress to a final investment decision, Kumul as the PNG representative can take up an option to own 22.5 per cent, handing it an important strategic role in the development of the 5.6 million-tonne-a-year facility.

PNG opposition petroleum minister Kerenga Kua said it was imperative that the consortium headed by ADNOC’s XRG subsidiary made its case to the government and communities linked to the existing PNG LNG project should the deal for Santos advance.

“For things like PNG LNG and Papua LNG where Santos has a stake, the state also has a stake in that,” Mr Kua said. “And if this Abu Dhabi company is going to become your joint venture partner in an existing project, then it’s important that you understand what we are getting into and give the appropriate assurances to the country.”

Santos rolled out a new capital framework in late 2024 that prioritised handing more cash to investors over heavy supply invest­ment, paving the way for a cashed-up suitor to potentially speed up a pipeline of growth projects.

Papua New Guinea's Prime Minister James Marape and Anthony Albanese. Picture: AFP

While XRG has not yet given any sense of its own views of where it may deploy cash for Santos’s bulging pipeline of projects, investment in PNG is likely to loom as a priority given the existing PNG LNG development is widely considered one of the world’s top gas export facilities.

Abu Dhabi’s representatives must come to the negotiating table in PNG, Mr Kua said.

“The incoming shareholders must make it their business to understand us, our country, our dreams, our aspirations, our economic and our political circumstances, and quickly align themselves to it,” he said. “We must also learn about them and align with them as well, because going forward a healthy partnership is always important.

“This is the same call we made time and time again when Santos made its move on Oil Search.

“Now, more so than before, because we are going further afield, involving a country and a company who have not to my knowledge any business association in the oil and gas space in Papua New Guinea.”

Consultancy Rystad Energy said the Santos deal could mark the beginning of more acquisitions from XRG to help realise its LNG ambitions.

“ADNOC’s expansion reflects a strategic shift among Middle Eastern energy producers, such as Saudi Aramco and QatarEnergy, who are investing in global LNG assets to secure market share and influence in a transitioning energy landscape,” it said. “This trend underscores the increasing role of state-backed entities in shaping the future dynam­ics of the global LNG market.”