TotalEnergies to lower stake in Papua LNG, hand operatorship to Exxon

By Hugo Lhomedet and Emily Chow

Sept 7 (Reuters) - TotalEnergies is cutting its stake in Papua LNG and handing operatorship to ExxonMobil, the companies said on Monday, as pressure mounts to secure a final investment decision by the end of the year on the long-delayed project. 

The French energy major, which co-owns the project with Exxon, Santos, Kumul Petroleum/MRDC and ENEOS Xplora, said it would sell a 9.1% stake to its partners in proportion to their existing holdings, while retaining a 20% stake. It did not disclose the sale price.

Australia's Santos said it had acquired an additional 3.3% stake in the project for $189 million, lifting its interest to 21% and boosting its equity liquefied natural gas production by about 19% to around 1.2 million metric tons per year (Mtpa).

The deal is subject to Papua LNG reaching a final investment decision (FID), expected in the fourth quarter of 2026, Santos said. TotalEnergies said contractual and commercial hurdles had now been cleared for that decision.

"This is all part of lining up FID by year end, which will help extend the life of PNG LNG that would otherwise begin to decline from around 2028," said MST Marquee analyst Saul Kavonic, referring to the neighbouring LNG project already operated by ExxonMobil.

"Bringing Papua LNG and PNG LNG under ExxonMobil operatorship is expected to strengthen alignment across the projects, improve execution efficiency, and support the development of Papua New Guinea's world-class LNG resources," an ExxonMobil spokesperson said.

TotalEnergies said it had completed the tendering process for engineering, procurement and construction work for the project, with contracts now pending its partners' approval.

The company added that nearly $4 billion in cost savings had been achieved since 2024 through rebidding contracts and optimising the project design, cutting estimated capital expenditure to about $14 billion.

The partners have also finalised an amended gas agreement with Papua New Guinea's government and established an LNG marketing joint venture with Kumul Petroleum to sell 2.4 Mtpa of the project's 5.6 Mtpa output.

YEARS OF DELAY

Papua LNG is part of TotalEnergies' strategy to expand lower-cost LNG supply. The project, which is expected to produce 5.6 Mtpa from the Elk and Antelope fields in Papua New Guinea's Gulf Province, mainly for Asian buyers, has been in the works for more than a decade but has faced repeated delays from fiscal disputes, the pandemic and negotiations among partners.

TotalEnergies' offtake share remains unchanged, giving it access to 1.5 Mtpa for its LNG portfolio. However, the stake sale will free up capital for other projects.

TotalEnergies has one of the industry's largest LNG investment commitments among projects under construction, said Marc Howson, head of Asia Pacific at Welligence Energy Analytics, including stakes in developments in the Middle East, the U.S. Gulf Coast, and West and East Africa.

(Reporting by Hugo Lhomedet in Gdansk, Tanishk Kumar in Bengaluru and Emily Chow in Singapore. Additional reporting by Marwa Rashad. Editing by Milla Nissi-Prussak, Dominique Patton and Mark Potter)