Australia’s Santos Ltd. has entered into a binding agreement to sell a 2.6 percent participating interest in PNG LNG to Papua New Guinea’s Kumul Petroleum Holdings Ltd. for $576 million in cash and the assumption of approximately $160 million of project finance debt, the two companies said.
The completion of the agreement is not subject to finance and is conditional on the approval of the PNG competition regulator on or before December 31, Santos said in a press release. Kumul has paid $80 million into escrow as partial payment and has undertaken further pre-payments of the purchase consideration into escrow throughout the period up until completion, Santos said.
Upon completion of the sale, Kumul also has a call option to acquire a further 2.4 percent participating interest in PNG LNG for $524 million in cash plus $145 million of project finance debt, Kumul said. The call option must be exercised on or before June 30, 2024, and is subject to customary conditions, including necessary regulatory approvals and third-party consents, according to the release.
“I am pleased we’ve reached a binding agreement with Kumul on the sale of up to five percent of PNG LNG. This re-structured transaction is a pragmatic solution that provides a clear pathway to completion and builds our strategic alignment with Kumul and our long friendship with PNG, where Santos has been a committed corporate citizen for over 40 years”, Santos Managing Director and CEO Kevin Gallagher said.
“PNG LNG is a low-cost and low emissions intensity asset that contributes strong cash flows to the project participants and economic and social benefits to the nation”, Gallagher added.
“This transaction is the culmination of many months of discussions that have taken place with national and international financiers since the NEC [National Executive Council] gave its initial approval for KPHL [Kumul] to acquire additional equity in the PNG LNG Project in September 2022”, Kumul Managing Director Wapu Sonk said. “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”.
”Kumul Petroleum has ensured that entering into financing arrangements to acquire additional equity in the PNG LNG Project will not affect its financial capability to take up the State’s full 22.5 percent equity entitlement in the forthcoming Papua LNG Project and also continue to pay annual dividends to the State, in line with our annual operating plans”, Sonk added.
”Kumul Petroleum, as the national petroleum and energy company, is fulfilling its vision statement, which is to build the nation through its energy resources. We must balance long-term commercial investments and consequent sustainable income streams with our ability to support the National Government to achieve its development priorities as outlined in the Medium Term Development Strategy and Vision 2050 plans”, Sonk said.
“This transaction will increase Kumul’s interest in PNG LNG and supports the PNG government objectives for the people of PNG to have a greater equity interest in the development of their natural resources”, Papua New Guinea Prime Minister James Marape said in the Santos release.
According to the Santos website, PNG LNG is an integrated development that includes gas production and processing facilities that extend from Hela, Southern Highlands, the Western and Gulf provinces to Port Moresby. The facilities are connected by over 435 miles (700 kilometers) of onshore and offshore pipelines and include a gas conditioning plant in Hides and a two-train liquefaction and storage facility near Port Moresby. Since producing LNG in April 2014, PNG LNG has been supplying LNG to four long-term major customers in Asia, according to the company.