Santos to purchase 14.32% stake in P’nyang gas field in PNG

Santos has signed a binding letter of intent to acquire a 14.32% equity interest in Petroleum Retention Licence 3 (PRL 3), which contains the P’nyang gas field in Papua New Guinea (PNG) for a total consideration of $187m.

The stake will be purchased from existing participants in the PRL 3 licence, including Oil Search, JX Nippon, and ExxonMobil.

A fully termed sale and purchase (S&P) agreement is anticipated to be executed around the end of next month subject to the parties reaching an agreement on entry into FEED for PNG LNG plant expansion.

Santos will pay $120m of the total payable amount following the execution of the S&P agreement.

The remainder will be paid in instalments subject to several conditions, including the award of a production development licence to replace PRL 3 and a final investment decision for the construction of an additional LNG train at the PNG LNG plant site.

The agreement will help advance the expansion of the PNG LNG plant and help supply new capacity. The PRL 3 participants made a proposal to coordinate with the PNG LNG project participants to develop the P’nyang field, leveraging existing infrastructure.

Gas for two of the proposed new trains at the PNG LNG project will be fed from the Elk-Antelope fields, while one train will be underpinned by gas from the LNG project and the P’nyang field.

Santos managing director and CEO Kevin Gallagher said: “The arrangements we announce today mark an important step towards the proposed expansion at the PNG LNG plant via a 2.7Mtpa third LNG train fed by existing project resources and P’nyang.”

“We are very pleased to execute the letter of intent with the PRL 3 participants, who are also affiliates of Santos’ partners in the PNG LNG Project. We look forward to working with the PNG Government, our partners and landowners to make expansion at PNG LNG a reality.”

Once the deal is completed, ExxonMobil’s stake in the PRL 3 will decline from 48.99% to 36.86%, while that of Oil Search will drop from 38.51% to 36.86%. Meanwhile, JX Nippon’s stake will reduce from the existing 12.50% to 11.96%.

Oil Search will receive a sum of $21.6m for selling 1.65% stake in the licence to Santos.

The participants in the PRL 3 are waiting to reach an agreement with the PNG Government for the development of the field.

Santos also owns a 13.5% interest in the PNG LNG project, which currently has a capacity to supply more than 8Mtpa of LNG.