Santos Exits Proposed A$6 Billion PNG to Queensland Gas Pipeline Project

Strategic Insights -

Australia's Santos Ltd has abandoned its proposed A$6 billion project to build a gas pipeline between Papua New Guinea (PNG) and the state of Queensland, citing commercial terms disagreements. The project, however, remains likely to proceed under a new agreement with Exxon Mobil Corporation as the lead operator. Santos' exit is a significant setback for the long-delayed project, which has faced numerous challenges, including PNG government's funding issues and slow gas sales agreement uptake.

Key Takeaways:

  • Santos Ltd has pulled out of the A$6 billion PNG to Queensland gas pipeline project due to disagreements over commercial terms.
  • The project will continue under a new heads of agreement, which provides more flexibility for the operators, according to Exxon Mobil Corporation.
  • Santos holds a 31% interest in the Hides gas field in PNG, which was expected to be a major source of gas for the project.
  • The new agreement will accelerate the project towards the engineering stage, with Santos' 12.5% stake to be redistributed among the other players.
  • Exxon Mobil Corporation will remain the lead operator of the project, while Santos remains committed to its development, subject to satisfactory commercial foundations.
  • The project has faced numerous delays due to PNG government's funding issues and slow gas sales agreement uptake.
  • The PNG government is yet to finalize its plan to take a stake in the project, with Exxon's Chris Welberry encouraging progress made.

Statistics:

  • A$6 billion: the proposed value of the PNG to Queensland gas pipeline project.
  • 31%: the percentage of interest held by Santos in the Hides gas field in PNG.
  • 12.5%: the percentage of interest held by Santos in the project, which will be redistributed among the other players.
  • A third: the expected share of the project to be held by the PNG government, which struggled to raise funds.
  • 12%: the indirect percentage of the gas earmarked for the PNG gas project owned by Santos.
  • 1 January: the date on which the new agreement came into effect.
  • 31 December: the date before which the old terms were in place.

Sources:

  • Reuters, "Santos quits A$6 bln PNG to Queensland gas pipeline project: AAP", 2 January 2023.
  • AAP, "PNG gas proposal to continue under new deal with Exxon", 2 January 2023.
  • Santos Ltd, "Santos withdraws from proposed PNG gas project", press release, 2 January 2023.
  • Exxon Mobil Corporation, "PNG gas proposal moves forward under new agreement", press release, 2 January 2023.