There have been persistent rumours that Santos was considering taking a stake in the PNG Gas project. Santos has declined to comment but Oil Search head Peter Botten said on the weekend that negotiations with Santos were underway.
Santos holds 25% equity in the Hides gas field, a large field close to the existing PNG Gas Project fields. The project partners aim to bring into the development as it expands and Hides is seen as being crucial to project.
According to a report in today’s Australian, Santos managing director John Ellice-Flint said last night the latest deal between AGL and the PNG Gas Project was a great opportunity for Santos to secure a market for its Hides gas.
Santos had rationalised its prospects in several areas but had retained the Hides field because of its potential, Ellice-Flint said.
Some analysts have said Santos had lost a key bargaining chip by not signing on before the project looked set to go ahead, and would probably pay a premium to become involved at this stage, according to the Sydney Morning Herald.
But the PNG Gas Project partners need Hides and they know Santos’ involvement in the development would probably be the final building block that secured its future. They also know that Santos has just agreed to pay what is considered to be a high price to take over coalbed methane producer, Tipperary.
So the existing project partners may decide they need Santos and must offer the company an affordable deal.