STO Santos Limited

By Rhiannon Hoyle

ADELAIDE, Australia--Santos Ltd. has received a $1.4 billion offer from Papua New Guinea's state-owned oil and gas company to buy a 5% interest in PNG LNG, a large liquefied natural gas development, from the Australian company.

The proposed deal reflects the Papua New Guinean government's desire to get a greater share of the profits from the country's natural resources.

Adelaide-based Santos said Tuesday that it received the binding conditional offer, including project finance debt of roughly $300 million, from state-owned Kumul Petroleum Holdings Ltd., an existing partner in the PNG LNG development.

If the deal went ahead, it would increase the state-run group's interest in the project to 21.8%. Kumul couldn't immediately be reached for comment.

The $19 billion PNG LNG project is an integrated development that comprises gas production and processing facilities extending across several provinces. It is operated by Exxon Mobil Corp. A unit of Japan's JX Holdings Inc. and Papua New Guinea's state-owned Mineral Resources Development Co. also own stakes.

Santos became the largest shareholder in the project following its takeover of Oil Search, which also owned a large stake in the development. It would retain a 37.5% interest in the project if the sale proceeds. Exxon Mobil has a 33.2% stake.

Santos Chief Executive Kevin Gallagher said the proposed deal "represents an opportunity to build strategic alignment for the future development of PNG's natural gas resources, including via PNG LNG infrastructure."

Production at PNG LNG started in 2014, and the facility supplies customers in Asia, including in China and Japan.

Santos said Kumul has paid $55 million into escrow to secure the offer, which will remain open until Dec. 31 and is conditional on Kumul obtaining waivers on some pre-emptive rights by other project partners.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

September 26, 2022 21:23 ET (01:23 GMT)

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