UPDATE 1-Australia’s Santos buys into Exxon-led gas field in PNG for $187 mln

FILE PHOTO: A sign for Santos Ltd is displayed on the front of the company’s office building in the rural township of Gunnedah, located in north-western New South Wales in Australia, March 9, 2018. REUTERS/David Gray/File Photo

(Reuters) – ExxonMobil has agreed to sell down its holding in the P’nyang gas field in Papua New Guinea to Santos Ltd, giving the Australian company a stake in the field that will help feed an expansion of Exxon’s PNG LNG project.

Santos has agreed to buy a 14.3% stake from the existing partners in P’nyang, including Oil Search Ltd and JX Nippon, but mostly from ExxonMobil, for a total of $187 million, Santos said in a statement on Thursday.

The deal helps smooth the way for the planned expansion of PNG LNG, roughly aligning Santos’ 13.5% stake in the LNG project and the new gas field.

“The arrangements we announce today mark an important step toward the proposed expansion at the PNG LNG plant via a 2.7 metric tonnes per annum third LNG train fed by existing Project resources and P’nyang,” said Santos’ Chief Executive Kevin Gallagher.

The P’nyang partners are waiting to seal an agreement with the government for development of the field, but the signing has been delayed amid political ructions in Papua New Guinea, where the government of Prime Minister Peter O’Neill faces a possible vote of no-confidence after parliament resumes on May 28.

Oil Search said it would receive roughly $21.6 million for relinquishing a 1.65% stake in P’nyang to Santos, bringing its holding to 36.86%. Exxon will hold a similar stake in the venture after the deal, having relinquished about 12.1% of its stake to Santos.

Santos’ shares rose as much as 2% after the announcement, in a slightly stronger broader market.

Reporting by Ambar Warrick in Bengaluru; editing by Richard Pullin

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