PERTH (miningweekly.com) – Oil and gas major Santos has struck a $576-million deal to sell off a 2.6% participating interest in the Papua New Guinea (PNG) liquefied natural gas (LNG) project to Kumul Petroleum Holdings.

Kumul will also assume $160-million of project financing debt.

Additionally, Santos has agreed to grant Kumul a call option to acquire a further 2.4% participating interest in PNG LNG for a cash purchase price of $524-million, plus a proportionate share of project finance debt. The call option must be exercised on or before the end of June 2024 and is subject to completion of the sale agreement having occurred and the satisfaction of customary conditions, including necessary regulatory approvals and third-party consents.

“I am pleased we’ve reached a binding agreement with Kumul on the sale of up to 5% 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 CEO and MD 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.”

PNG Prime Minister James Marape has welcomed the agreement.

“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,” Marape said.

The completion of the sale agreement is not subject to finance, but is conditional on the approval of the PNG competition regulator before the end of the year.

Kumul has paid $80-million into escrow with Santos as part payment of the purchase consideration. The company has also undertaken to make further pre-payments of the purchase consideration into escrow throughout the period up until completion.

The PNG LNG assets produced 19.8-million barrels of oil equivalent in the first half of the 2023 financial year, generating revenues of $1.4-billion.