SANTOS has moved closer to completing its move into a key Papua New Guinea permit with the signing a binding letter of intent (LOI) which sets out the terms by which the Australian company will purchase a 14.32% equity interest in Petroleum Retention Licence (PRL) -3.

PRL-3 contains the giant P’nyang gas field, which the licence participants ExxonMobil, Total, Oil Search, JX Nippon and soon Santos, propose to develop in coordination with the participants in the PNG LNG Project to leverage the advantages of existing infrastructure.

Under the binding letter of intent, the parties have agreed for:

  • Santos to acquire a 14.3% interest (pre-government back-in) in PRL-3 from the existing PRL-3 participants.
  • Santos to pay US$187 million in total, with approximately US$120 million payable following the execution of a fully-termed sale and purchase agreement, expected around the end of June 2019, and the remainder in contingent instalments subject to the award of a production development licence to replace PRL 3 and a final investment decision for the construction of an additional LNG train at the PNG LNG plant site for the liquefaction of gas from the P’nyang field.

The execution of a sale and purchase agreement remains subject to agreement between the parties on entry into FEED for PNG LNG plant expansion.

The P’nyang field has a certified gross 2C contingent resource of approximately 4.4 trillion cubic feet1 (tcf) of natural gas (approximately 0.62 tcf net to Santos pre-government back-in).

Santos managing director and ceo Kevin Gallagher said the company’s strategy in PNG is to work with its partners to align interests, and support and participate in backfill and expansion opportunities at PNG LNG. 
“The arrangements we announce today mark an important step towards the proposed expansion at the PNG LNG plant via a 2.7 mtpa third LNG train fed by existing Project resources and P’nyang.

“We are very pleased to execute the letter of intent with the PRL 3 participants who are also affiliates of Santos’ partners in the PNG LNG Project.” 
“We look forward to working with the PNG Government, our partners and landowners to make expansion at PNG LNG a reality,” Mr Gallagher said.

Santos has a 13.5% interest in the PNG LNG Project which has the capacity to produce more than eight million tonnes of LNG per annum.