The door opens for Santos into the Papua New Guinea to Queensland gas project
PostCourier, February 2
BRISBANE: Oil Search Ltd will sell a 25 per cent stake in the Hides gas field in Papua New Guinea to Santos Ltd for up to $A142 million (K192 million).
The move opens the door for Santos into the multi-billion dollar PNG to Queensland gas project.
Santos will pay Oil Search $US55 million cash, plus a contingent payment of between $US25-35 million, subject to the pipeline project proceeding and drawing on the Hides reserves, and the initial project value at commitment.
''The PNG to Queensland gas project, if it proceeds, will help achieve the objective of obtaining a return on this major investment,'' Santos said.
Oil Search managing director Peter Botten said the deal with Santos' PNG subsidiaries would reduce Oil Search's stake in Hides to 27.5 per cent from 52.5 per cent, with US energy giant Exxon holding the remaining 47.5 per cent.
''Santos have clearly made a major strategic acquisition in the Hides field, which represents a significant investment for them and strong endorsement that the PNG to Queensland project has a good chance of reaching commercial reality,'' he said in a statement.
Oil Search will use the sale proceeds to pay down its debt. The company last Friday completed re-financing of a $US292.5 million bridging facility with a group of six banks.
Mr Botten said Oil Search would remain the largest interest holder in the pipeline project despite the Hides sale, which had been signalled last year following the acquisition of licences from BP.
''The company remains totally committed to developing Hides gas for the PNG to Queensland gas pipeline project, and, in the longer-term, LNG development,'' Mr Botten said.
Negotiations are underway to incorporate Hides' proven and probable reserves of more than five trillion cubic feet into the pipeline project's existing reserves of roughly half that size, centred on the Kutubu and Gobe fields in PNG's southern highlands.
Major potential customers such as Comalco Ltd, which has flagged the possibility of building a gas-fired alumina refinery in Gladstone, will not finalise sales agreements until long-term supply can be guaranteed.
PNG Gas Project public affairs manager Cliff Leggoe said Santos' involvement in Hides was unlikely to delay reserve integration negotiations. ''We don't see this as having any negative impact on negotiations or the project,'' he said.
Mr Leggoe said Santos could add positive dimensions with its vast experience in gas marketing in Queensland and long-term potential to supply access to other PNG gas fields.
Santos group companies had made previous discoveries in PNG, such as the Elevala gas field, and acquired the PNG petroleum operations of MIM Holdings Ltd, including the SE Gobe oil field.
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