Kumul Closes Buy of Additional PNG LNG Stake from Santos after Chevron Deal

Papua New Guinea’s national oil and gas company has completed a transaction to acquire from Santos Ltd. an additional interest of 2.6 percent in the PNG LNG project, after securing an offtake agreement with Chevron Corp. to help fund the purchase.

Kumul Petroleum Holdings Ltd. (KPHL) now holds a 19.2 percent interest in the project, “including the 4.27 percent Kroton Equity Option shareholding, held for beneficiaries which are impacted provincial governments and landowner groups”, the state company said in a statement Monday.

The total cash consideration was $602 million, Australian exploration and production company Santos confirmed in a separate statement.

“Under our agreement with Santos we made a part payment of US$352 million earlier this year, with the balance to be paid by December 2024, and we have just completed this share acquisition, well before the end of the year”, Kumul managing director Wapu Sonk said in the statement on Kumul’s website.

Kumul fulfilled the payment earlier than the deadline thanks to a forward sales agreement with the Singapore arm of United States energy giant Chevron.

“Following an extensive bid process with major trading, utility and other entities to source funding, we selected Chevron’s forward sales agreement”, Kumul said in a separate press release Monday.

“Under the agreement, Chevron will make an advance payment to Kumul Petroleum, in exchange for LNG and condensate cargoes over the next two years.

“Since the introduction of equity marketing at the start of 2024, KPHL has sold 4 LNG cargoes on the spot market and this term-sale will provide more security for KPHL”.

On April 17 Kumul announced that for the first time, it directly sold LNG in the spot market using its share of PNG LNG production that was not committed to long-term sales agreements. The buyer was PetroChina International Corp. Ltd, which had won a tender process held February.

Following the completion of the acquisition from Santos, Kumul now assumed about $90 million of existing project debt associated with the divestment, Santos, which now owns 39.9 percent of PNG LNG, said in the statement on its website.

Kumul has an option to buy a further 2.4 percent from Santos, according to Santos’ announcement of the agreement for the 2.6 percent stake transfer on September 1, 2023.

“The Call Option must be exercised on or before 30 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”, Santos said then.

In Monday’s deal closure announcement, Sonk said, “This acquisition positions the company to prepare to take up its mandated 22.5 percent equity in the forthcoming Papua LNG Project, whose FID is expected in late 2025, as well as other activities that the company continues to pursue”.

PNG LNG started production April 2014. The Exxon Mobil Corp.-led consortium expects to produce over 11 trillion cubic feet of LNG over the project’s life. The U.S. energy major operates PNG LNG through ExxonMobil PNG Ltd. The other co-venturers are JX Nippon Oil & Gas Exploration Corp. and Mineral Resources Development Co. Ltd., also a Papua New Guinea state company.

To contact the author, email jov.onsat@rigzone.com