Papua New Guinea Prime Minister James Marape has warned Santos Ltd. and Oil Search Ltd. that he expects any merged entity of the two companies to continue a significant local presence in the country (OGJ Online, Aug. 2, 2021).
Among other conditions, any merger agreement will be subject to PNG government approval. Marape said that any proposed merger must satisfy the national interest test.
“We do not want the largest oil and gas company operating in our country to simply be a branch office of a foreign company,” he said.
“It is important that the merged entity ensures significant local influence on decisions affecting Papua New Guinea assets, jobs, and the broader community.”
Any merger involving Oil Search will need to consider the timing of the development of PNG’s gas resources, the employment and training of PNG nationals, and the retention of in-country corporate offices and management, according to Marape.
Oil Search’s operations in PNG constitute a large portion of the country’s GDP.
The Prime Minister said the government’s top priority is to ensure that projects like Papua LNG (Elk-Antelope) and P’nyang gas (PNG-LNG extension) proceed as soon as possible. To this end, he said he recognizes that the proposed merger can provide higher capacity and value to those projects as well as being a strong positive statement of investor confidence in PNG’s operating environment.
Current PNG LNG project joint venture interests are ExxonMobil (operator) with 33.2%, Oil Search 29%, Kumul Petroleum Holdings 16.8%, Santos 13.5%, JX Nippon Oil and Gas Exploration 4.7%, and Mineral Resources Development Co. (MRDC) 2.8%. A merger of Santos and Oil Search would see the new entity holding 42.5% interest.
Current Papua LNG joint venture interests are Total (operator) with 40.1%, ExxonMobil 37.1%, and Oil Search 22.8%. A merger of Santos and Oil Search would result in the new entity holding Oil Search’s current 22.8%. These interests are prior to a PNG State back-in right of 22.5%.
To date there has been no public reaction from ExxonMobil or Total to the Santos-Oil Search merger proposal.