Santos has received an offer from Papua New Guinea’s (PNG) national oil and gas company Kumul Petroleum to acquire a 5% stake in the former’s $19bn PNG liquefied natural gas (LNG) project, located near Port Moresby, for approximately $1.4bn.

The consideration of the binding conditional offer includes a proportionate share of project finance debt of nearly $300m.

Kumul Petroleum currently holds a 16.8% stake in the PNG LNG project, which has gas production and processing facilities that extend from the Hela, Southern Highlands, Western, and Gulf provinces to Port Moresby in Central Province.

Upon completion of the potential transaction, Santos ’ stake in the project will be reduced to 37.5% while boosting Kumul’s stake to 21.8%, reported Reuters.

Santos will now negotiate a heads of agreement with Kumul Petroleum to further work on the development of the latter’s regional capacity and capability.

Santos managing director and CEO Kevin Gallagher said: “PNG LNG is a low-cost and low emissions intensity asset that contributes strong cash flows to the project participants and economic and social benefits to the nation.

“Following the transaction, Santos would maintain a 37.5% interest in this world-class project. Santos has been a committed partner in PNG for over 40 years, involved in more than 30 different licenses and has significant community partnerships and projects across the nation.”

In an effort to secure the offer, Kumul made a $55m payment, which will be held in escrow. The amount will be released as a deposit to Santos for partial payment of the offer consideration if it accepts the proposal.

Santos also agreed to deal exclusively with the PNG oil and gas firm until 31 December 2022, regarding the stake sale in the LNG project.

The other partners in the PNG LNG project are ExxonMobil, holding an operatorship stake of 33.2%; PNG state-owned Mineral Resources Development , with a 2.8% interest; and JX Nippon, with a 4.7% stake.

The offer is subject to Kumul Petroleum securing the waivers of some pre-emptive rights by the other partners of the PNG LNG project under the project operating agreement.

The PNG LNG integrated project includes gas production, processing, and liquefaction facilities, as well as onshore and offshore pipelines.