Santos to Pay $189 Million for Bigger Stake in Papua LNG as ExxonMobil Takes Over From TotalEnergies

Santos Ltd. has agreed to pay approximately $189 million to increase its stake in the Papua LNG project, according to a company statement released Monday. The Australian energy company will acquire an additional 3.3% participating interest in Petroleum Retention Licence 15 and the Papua LNG project from TotalEnergies, lifting its total stake to 21% once Papua New Guinea's government exercises its back-in rights.

The purchase is conditional on regulatory approval and on the project reaching final investment decision, which Santos expects in the fourth quarter of 2026, per the company's release. The deal is structured to be economically effective retroactive to January 1, 2026.

Santos says the added stake will boost its equity LNG production from the project by about 19%, to roughly 1.2 million tonnes per year. Santos Managing Director and CEO Kevin Gallagher called Papua LNG "a world-class development, strategically positioned to supply premium Asian markets," and said the timing made sense as Santos moves its Barossa gas and Pikka oil projects into operation.

ExxonMobil Takes the Wheel

The Santos stake increase is one piece of a larger ownership reshuffle. TotalEnergies has agreed to hand operatorship of Papua LNG to ExxonMobil PNG Antelope Limited, according to a TotalEnergies statement carried by Investing News Network and confirmed by Oil & Gas Journal and OE Digital.

As part of that handover, TotalEnergies will sell a 9.1% interest in the project, after Kumul Petroleum's state back-in, to the other joint venture partners in proportion to their existing stakes. Once the dust settles, ExxonMobil will hold 34.1% and operatorship, TotalEnergies 20%, Santos 21%, ENEOS Xplora 2.4%, and Papua New Guinea entities Kumul Petroleum Holdings and MRDC a combined 22.5%.

ExxonMobil already operates the neighboring PNG LNG plant, an 8-million-tonne-per-year facility. Santos said putting both projects under one operator should create construction and operating synergies. TotalEnergies Chairman and CEO Patrick Pouyanné said the operatorship transfer "enhances the project's value creation and competitiveness by leveraging the synergies with PNG LNG during construction and operations phases."

Cost Cuts That Unstuck the Project

Papua LNG has been stalled before. TotalEnergies said in 2024 that initial EPC contractor bids weren't commercially viable, forcing the partners back to the drawing board, according to Oilprice.com's reporting on the deal.

Since then, TotalEnergies says project redesign and a rebidding process that opened competition to a wider pool of Asian engineering and construction firms have generated close to $4 billion in savings. Estimated capital expenditure is now around $14 billion, down from earlier projections. The EPC tendering process is complete, with contract award recommendations ready for the co-venturers to sign off on.

The partners have also finalized an amended gas agreement with the Papua New Guinea government, updating the original 2019 deal to reflect the new budget. TotalEnergies and Kumul Petroleum have set up a joint marketing venture to sell 2.4 million tonnes per year of the project's planned 5.6-million-tonne annual output, and TotalEnergies has separately signed a heads-of-agreement to buy 1.5 million tonnes per year from that venture for its own global LNG book.

What's Left Before FID

Oil & Gas Journal reported on August 21 that Santos was already targeting a fourth-quarter FID, with environmental permits issued and a development forum held earlier this year. Santos said Papua LNG would draw on 4 million tonnes per year from new electric liquefaction trains plus up to 2 million tonnes per year of tolling capacity from ExxonMobil's existing PNG LNG plant.

Santos also disclosed it has backfill options for PNG LNG production if Papua LNG doesn't move forward, though the company said all parties remain focused on getting the project sanctioned. Papua LNG is designed to tap the Elk-Antelope gas fields in Gulf Province, with output aimed primarily at Asian buyers.

The $189 million Santos payment, the operatorship swap, and the amended PNG gas agreement are all contingent on the same event: a final investment decision that Santos and TotalEnergies both peg to the fourth quarter of 2026. Every piece of this restructuring remains conditional pending that decision, and the project's decade-long history of delayed sanctioning means the FID date itself is not guaranteed to hold.