Santos will proceed later this year to build a $19.5 billion LNG project in Papua New Guinea after its French partner TotalEnergies announced a suite of deals that include Australian second-largest oil and gas company lifting its stake in the venture.
Santos will become the second-biggest overseas partner in the $US14 billion ($19.5 billion) Papua LNG project after ExxonMobil as a result of TotalEnergies reducing its stake to 20 per cent.
Santos is paying $US189 million to increase its holding by 3.3 per cent to 21 per cent, where it will own more than a fifth of the 5.6 million tonne-a-year project even after the PNG government exercises its right to back into the venture.
Meanwhile, ExxonMobil is taking over as operator of Papua LNG from TotalEnergies as part of a bid to cut costs. TotalEnergies said almost $US4 billion had been carved from the construction cost since the project was put on hold in 2024 after the budget blew out.
Exxon already manages the highly profitable PNG LNG venture, in which Santos also has a stake, and Papua LNG will now be more closely integrated into that plant.
Santos chief executive Kevin Gallagher said the purchase of an additional stake in Papua LNG better aligned the company’s interests across the two LNG projects ahead of a final investment decision later this year.
“Papua LNG is a world-class project and this is the right time to increase our position,” Gallagher said.
He said the project would “provide reliable, low-cost production for years to come”, which was why Santos was prepared to increase its investment.
TotalEnergies and its partners were forced to put Papua LNG on hold two years ago to rework the design and redo a competitive bidding process by contractors after the estimated cost blew out by about 50 per cent to about $US18 billion.
Last month, Santos flagged that a final investment was targeted in the December quarter on Papua LNG, and the deals announced by TotalEnergies paved the way for that milestone.
“These agreements mark a decisive step towards the final investment decision of Papua LNG,” TotalEnergies chief executive Patrick Pouyanne said.
He said the project would enable TotalEnergies to “secure significant LNG volumes, strategically located to support energy supply diversification across fast-growing Asian markets”.
TotalEnergies also set up an LNG marketing joint venture with PNG state oil and gas company Kumul Petroleum to jointly sell 2.4 million tonnes a year of production from Papua LNG, which it said would support the debt financing for the project. It will buy 1.5 million tonnes a year of that for its own global portfolio.
The increase in Santos’ holding brings its share of LNG from Papua LNG to 1.2 million tonnes annually.
Shares in Santos are up almost 36 per cent this year to trade last at $8.35.
Source: https://www.afr.com/companies/energy/santos-boosts-stake-in-19-5b-papua-lng-project-20260907-p60v7r