Santos is increasing its stake in the planned Papua LNG development as part of a broader restructuring that will see ExxonMobil take over operatorship of the major liquefied natural gas project from TotalEnergies.
The Australian energy company has agreed to acquire an additional 3.3% participating interest in Petroleum Retention Licence 15 and Papua LNG from TotalEnergies for approximately $189 million. The transaction would lift Santos’ interest to 21% after the Papua New Guinea state exercises its back-in rights.
Santos expects the additional interest to increase its share of LNG production from Papua LNG by about 19%, to approximately 1.2 million tonnes per year.
The acquisition remains conditional on regulatory approvals and Papua LNG reaching a final investment decision, which Santos expects in the fourth quarter of 2026. The transaction will be economically effective from January 1, 2026.
The stake purchase forms part of a wider reshuffling of Papua LNG’s ownership and operating structure. TotalEnergies has agreed to transfer operatorship to ExxonMobil PNG Antelope Limited and sell a 9.1% post-state-back-in interest to its existing partners.
Following the changes and the state back-in, TotalEnergies expects to retain a 20% interest, while ExxonMobil will hold 34.1% and become operator. Santos will own 21%, ENEOS Xplora 2.4%, and Papua New Guinea entities Kumul Petroleum and MRDC will hold a combined 22.5%.
The operatorship transfer could be particularly significant for project execution because ExxonMobil already operates the neighboring PNG LNG development. Santos said placing both developments under ExxonMobil should create construction and operating synergies and better align the companies involved in Papua New Guinea’s two major LNG ventures.
Papua LNG is designed to develop the Elk-Antelope gas fields and produce around 5.6 million tonnes of LNG annually, primarily for Asian markets. TotalEnergies said Monday that project optimization and a renewed EPC tendering process have generated close to $4 billion in cost savings since 2024, bringing estimated capital expenditure down to around $14 billion.
The cost reduction is important because project economics had previously delayed Papua LNG. TotalEnergies said in 2024 that initial contractor bids were not commercially viable, prompting the partners to redesign parts of the development and reopen competition to a broader group of Asian engineering and construction companies.
Papua New Guinea’s government and the project partners have also recently amended the project’s gas agreement as they work toward sanctioning the development.
For Santos, the acquisition increases exposure to another large LNG project as its Barossa gas development and Pikka oil project transition toward production. It also deepens Santos’ position in Papua New Guinea, where the company already owns an interest in ExxonMobil-operated PNG LNG.
If Papua LNG reaches FID as planned, the development would provide Santos with a larger source of long-term LNG supply positioned close to major Asian importing markets while allowing the project to make greater use of ExxonMobil’s existing LNG infrastructure in Papua New Guinea.
By Charles Kennedy for Oilprice.com
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