Kumal Petroleum offers Santos $1.4 billion for 5% PNG LNG interest

Kumul Petroleum Holdings Ltd. has offered to acquire a 5% interest in the PNG LNG project from Santos Ltd. for US$1.4 billion.

The offer includes a proportionate share of project finance debt of around US$300 million.

The Papua New Guinea national oil company already holds 16.8% interest in the project as part of the government back-in right. The extra interest would raise Kumul’s interest to 21.8% and reduce Santos’s interest to 37.5%.

The offer is conditional on obtaining waivers of pre-emptive rights by the other PNG LNG partners—operator ExxonMobil (33.2%), JX Holdings (4.7%), and PNG land-owner entity Mineral Resources Development Co. (2.8%).

Kumul has placed US$55 million in escrow to be released as a deposit payment if Santos accepts the offer. The two companies will negotiate exclusively during an acceptance period scheduled to end Dec. 31, 2022.

As part of the proposed transaction, Santos and Kumul will negotiate a Heads of Agreement to further collaborate on development of Kumul’s regional capacity and capability, including carbon emission reduction opportunities, Santos said.

The sell-down by Santos is understood to be part of an arrangement with PNG Prime Minister James Marape made during the company’s acquisition of Oil Search Ltd. in 2021 that increased Santos’s interest in PNG LNG to 42.5% from 13.5%, making the company the project’s largest shareholder.

Prime Minister Marape has conveyed an objective for the government and the people of Papua New Guinea to hold a greater equity interest in development of all resource projects in the country.

PNG LNG centers on seven gas fields in the PNG highlands (Hides, Angore, Juha, Kutubu, Agogo, Moran, Gobe Main).

Gas is piped 700 km to a two-train, 8 million tonne/year LNG plant at Caution Bay just west of Port Moresby.

The plant was brought on stream in 2014. In 2020, project output reached record production of 8.8 million tonnes, exported via 115 LNG carrier shipments from the plant’s berthing and loading infrastructure.