Santos, Kumul enter restructured deal for PNG LNG interest

Sept. 1, 2023
Santos Ltd. has agreed to sell to Kumul Petroleum Holdings Ltd. a 2.6% participating interest in PNG LNG for $576 million, plus $160 million share of project debt.

Santos Ltd. has agreed to sell to Kumul Petroleum Holdings Ltd. a 2.6% participating interest in PNG LNG for $576 million, plus $160 million share of project debt.

Kumul already holds 16.57% interest in the project as part of the government back-in right.

The operator also agreed to grant the Papua New Guinea national oil company a call option—to be exercised on or before June 30, 2024—to acquire a further 2.4% participating interest in PNG LNG for a cash purchase price of $524 million plus $145 million share of project finance debt. The option is subject to completion of the 2.6% interest agreement and satisfaction of certain conditions, regulatory approvals, and consents.

Papua New Guinea resource plan

If exercised, the combined acquisitions would increase Kumul’s share in PNG LNG by more than the 5% share it expressed interest in acquiring last year.

In recent years, Papua New Guinea Prime Minister James Marape has conveyed the government objective for the country to hold a greater equity interest in development of the country’s resources.

In September 2022, Santos acknowledged receipt of an offer from Kumul to acquire a 5% interest in PNG LNG (OGJ Online, Sept. 27, 2022). That offer and arrangements have now expired, Santos said.

Santos managing director and chief executive officer Kevin Gallagher outlined the deal as a re-structured transaction and a “pragmatic solution that provides a clear pathway to completion and builds our strategic alignment with Kumul.”

PNG LNG produces LNG for export to global markets and centers on seven gas fields in the PNG highlands (Hides, Angore, Juha, Kutubu, Agogo, Moran, Gobe Main). The plant was brought on stream in 2014. Gas is piped 700 km to a two-train, 8 million tonne/year LNG plant at Caution Bay just west of Port Moresby.

The LNG plant produced 4.2 million tonnes in first-half 2023, in line with the prior corresponding period, and shipped 55 cargoes.

“The PNG LNG project is a mature, profitable and de-risked petroleum project that has consistently operated above its nameplate capacity and which has many more years of commercial life left as additional gas fields are brought on line,” said Kumul Petroleum’s managing director, Wapu Sonk.

Completion of the initial 2.6% interest sale is not subject to finance and is conditional only on the approval of the PNG competition regulator on or before Dec. 31, 2023. Kumul has paid $80 million into escrow as part payment and plans to make further pre-payments into escrow up until completion.