Santos Exits PNG Gas Pipeline Group

Santos Ltd. has quit a $3.5 billion project to pipe natural gas to Australia from Papua New Guinea. ExxonMobil and partners, which include ChevronTexaco Corp., Oil Search Ltd. and Orogen Minerals Ltd., signed a new agreement, without former partner Santos, reported ExxonMobil officials. The remaining partners are re-negotiating project terms to divide up Santos' 12.5 percent stake. ExxonMobil and Oil Search control the majority of the gas.

The 2,000 mile pipeline project has been on hold due to disagreements between the partners on how to divide the revenue from gas and because of political problems. The companies have yet to announce final approval to the project, which was originally scheduled to begin in late 2001.

The new agreement will set the terms under the which the partners would operate and replaces a previous accord that expired December 31, 2001. The project will continue under a new heads of agreement that provides more flexibility in the commercial interaction between the partners. Santos will not be participating in the new heads of agreement, according to ExxonMobil.

Santos had this statement to make: Santos remains committed to the development of the PNG Gas Project but it must first be satisfied with the commercial foundations on which the project would be based. Santos will keep its 31 percent stake in the Hides gas field in Papua New Guinea, which will supply the pipeline.

Exxon Mobil owns 31 percent of the project. Oil Search owns 27.5 percent, ChevronTexaco owns 9.7 percent and Orogen owns 13 percent. Japan Petroleum owns 3.4 percent with the remaining 2.9 percent held by MRDC, a group of Papua New Guinea landowners.