Santos Penned an Agreement for the Divestiture of its PNG LNG Project to Kumul

Santos, an independent Australian company, has reportedly entered into an agreement to divest a 2.6% share in the 6.9mn t/yr PNG LNG project to Papua New Guinea's state-owned entity, Kumul. The transaction is valued at $576 million in cash, with Kumul taking on $160 million of finance debt. Additionally, Santos has provided Kumul with an option to purchase an extra 2.4% share in PNG LNG, priced at $524 million, along with a "proportionate share of project finance debt." This option is available until 30 June 2024, as mentioned by Santos.

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Upon the initial transaction's completion, Kumul's ownership in the project will increase to 19.4%, while Santos will retain its position as the primary shareholder, holding 39.9%. Following its 2021 merger with Oil Search, another Australian independent oil and gas company, Santos had anticipated reducing its stake in the ExxonMobil-led project by 5%.

This merger had previously elevated Santos's stake in PNG LNG from 13.5% to 42.5%. The exclusive deal with Kumul, which was extended twice and was due to end on 31 August, seems to have been adjusted, possibly due to Kumul's challenges in financing the entire 5% acquisition in a single transaction.

In a statement made on 23 August, Santos revealed that the PNG LNG project produced 4.2mn t from January to June, marking a decrease of 100,000t from the same timeframe the previous year. This resulted in 55 cargo shipments, one less than the 56 cargoes shipped in the first half of 2022. Despite facing a decline in the Hides gas venture and challenges in the Angore backfill project, Santos, in February, expressed its intention to sustain production levels at PNG LNG. They anticipate the first gas from the Angore project in 2024.

Furthermore, Santos is involved in three LNG production projects: the 3.7mn t/yr Darwin LNG, the 7.8mn t/yr Gladstone LNG (both operated by Santos), and PNG LNG. The company also possesses a 22.8% stake in the 5.3mn t/yr Papua LNG project, managed by TotalEnergies and currently in its initial engineering development phase. The stakeholders of this project are aiming for a final investment decision by early 2024.

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According to the article by Procurement Resource, Santos's strategic divestment of a portion of its stake in the PNG LNG project to Kumul signifies a reshaping of ownership dynamics in the region's energy sector. While Santos remains a dominant player, Kumul's increased stake underscores the state-owned entity's growing influence. Amidst production challenges and evolving partnerships, Santos's commitment to multiple LNG projects, including the promising Papua LNG, highlights its pivotal role in the region's energy future and the broader LNG market.