PERTH (miningweekly.com) – Oil and gas major Santos has extended its exclusivity period with Papua New Guinea (PNG) national oil and gas company Kumul Petroleum Holdings over the sale of a 5% stake in the PNG liquefied natural gas (LNG) project until the end of August.

Santos last year announced a binding conditional offer from Kumul valued at $1.4-billion for the sale of a 5% interest in the project, including a proportionate share of project finance debt of approximately $0.3-billion.

To secure the offer, Kumul has paid an amount of $55-million to Santos which will be held in escrow to be released to Santos as a deposit for part payment of the offer price if it accepts the offer.

The potential sale would increase PNG’s equity interest in the project to approximately 22% supporting the PNG government objectives for the people of PNG to have a greater equity interest in the development of their natural resources. 

Santos on Monday told shareholders that the company has agreed to deal exclusively with Kumul during this exclusivity period regarding the sale of equity in PNG LNG, while Kumul has agreed it will work closely with Santos during this extension period in order to assist it in arranging the finalisation of its acquisition financing with third parties. There is also strong support from both the government and the joint venture partners for the transaction proceeding.

Santos MD and CEO Kevin Gallagher said PNG LNG continues to represent compelling value for shareholders.

“With the significant changes in the global energy landscape over the last 12 months, PNG LNG remains a world-class asset that is low-cost, low emissions intensity and delivers reliable LNG supply to our customers in Asia,” Gallagher said.

“The project is positioned in a supportive regulatory environment, with fiscal stability arrangements in place ensuring that it contributes strong cash flows to project participants and delivers significant economic and social benefits to the nation. While the PNG project is a very valuable asset and Santos’ balance sheet is strong, Santos remains committed to selling 5% equity in the project to support the PNG government to achieve the nation’s equity objectives.”

PNG Prime Minister James Marape said he was fully supportive of continuing the transaction to purchase 5% of PNG LNG in pursuing PNG national interest and its nation building programmes.

“Given the volatility in the financial markets and high interest rate environment, I support Kumul’s request for a time extension to complete the transaction. With credible private sector lenders significantly advanced, I am confident that Kumul will secure an appropriate financing package,” he added.