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02 Dec 2021
Momentum continues to build for the compelling opportunity to create a company with the size and scale to fund the energy transition. The merger will deliver a company with a market cap of more than A$20 billion and that is in the top-20 ASX-listed companies and the 20 largest global oil and gas companies.
It is our intention to establish a secondary listing on the PNG exchange on standard terms and conditions for an exempt foreign listing. This will allow PNG based shareholders to trade their Santos shares on the local exchange.
This merger will create an entity that will have the balance sheet to fund major projects in PNG and facilitate the creation of a highly skilled workforce and progress the long-term wealth and prosperity of the people of PNG.
The merger is good news for Papua New Guinea. Importantly, the merged entity will bring significant benefits to shareholders and to PNG, including more than 4,000 Oil Search shareholders in PNG.
In discussions with Prime Minister Marape, I have made the following commitments:
· There will be no planned employee job losses for the national workforce based in Papua New Guinea as a result of the merger.
· Our intention is to offer a Papua New Guinea national a seat on the Santos board to reflect the importance of Papua New Guinea to Santos’ overall business.
· We recognise the important role Oil Search has played in Papua New Guinea through its social program and have committed to maintaining the work of the Oil Search Foundation. We will establish the leadership of the Papua New Guinea business in-country.
· We will implement a capability building program, including secondments, for high potential Papua New Guinea national employees to work across Santos’ broader portfolio of assets to develop their technical and leadership skills.
· We will maintain focus on exploration activities in Papua New Guinea to support the development and commercialization of the nation’s resources.
In support of the PNG governments aspirations to mitigate the impacts of global warming, our carbon solutions business will seek opportunities to work with the Papua New Guinea Government and regional stakeholders to identify and develop carbon abatement projects in Papua New Guinea as well as pursue future clean fuels opportunities such as hydrogen or ammonia.
Santos will also work with our JV partners to identify and pursue CCS opportunities in PNG. We will bring our disciplined, low-cost operating model to PNG. We have been through a significant turnaround at Santos over the past five years that culminated in us maintaining a cash generative business even through the challenges of COVID-19.
During the last 18 months, we did not lay one person off because of the pandemic. That is something I am incredibly proud of and is a testament to the hard work that has occurred across the business over the last few years to successfully turn it around.
The merger aligns with this long-term strategy to transform, build, and grow around our core, long-life assets. At Santos, we have a proud track record of working in partnership with local communities, providing jobs and business opportunities while safely and sustainably developing natural gas resources.
We are committed to creating a sustainable future for the communities where we operate and will continue to invest strongly in local partnerships that have positive and lasting impacts. We partner with our local communities to identify, evaluate, and progress projects which provide educational opportunities, including traineeships, and improve health and well-being.
Here in Australia, we have longstanding relationships with many Indigenous communities, with some dating back over 30 years. We currently have agreements with 21 Traditional Owner groups, many of whom have Indigenous Land Use Agreements with us.
In PNG, we have maintained a country office in Port Moresby since 1988 and we will seek to build local capability and promote opportunities for PNG citizens within our operations.
We will maintain Oil Search’s strong focus on community programs, and we have committed to maintaining the Oil Search Foundation. We will support the development of local contractors and suppliers so that all of the community benefits through our projects.
We have a proud history in PNG. We know PNG and PNG knows us. Santos has been a committed participant in PNG for over 40 years, having been involved in more than 30 different licenses and in the Papua Basin, becoming a producer in 1998 through the SE Gobe oil project in Gulf Province. We have previously contributed A$1 million to construct the Emergency Wing of the Hela Provincial Hospital in Tari, and provided A$500,000 in response to the 2018 earthquake.
I am personally committed to working with the government and the people of PNG under the merged entity to create a better future. For our industry, size, scale and strong free cash flow generation will be critical through the energy transition and the continued development of resources, particularly in PNG.
The merger will position us for success in the new era of cleaner energy and clean fuels. Critically, the merger will provide the platform for us to self-fund growth and deliver sustainable shareholder returns, well into the future.
The merger also provides an opportunity to improve alignment between the PNG LNG and Papua LNG projects, supporting the Papua LNG final investment decision, jobs growth and long-term wealth for Papua New Guinea and its people.
I was also pleased to share with Prime Minister Marape, Santos’ commitment to net zero Scope 1 and 2 emissions by 2040 and our plans to decarbonise. These plans centre around our carbon capture and storage projects and in the longer term, the transition to hydrogen.
I was pleased to see during COP26 in Glasgow that the Australian and Papua New Guinea Government’s agreed to join forces to create an efficient and accessible carbon market under the Indo-Pacific Carbon Offsets Scheme.
PNG was announced as the second international partner of the Australian scheme and will ensure that PNG is internationally recognised as a source of high-quality offsets. PNG joins Fiji has the only other international partner that other Pacific Island nations may also join.
It’s an exciting initiative from the Australian Government that we fully support. Santos has recently announced a final investment decision on our Moomba CCS project in outback South Australia. Moomba will be one of the biggest CCS projects in the world, safely and permanently storing 1.7 million tonnes of carbon dioxide per year in the same reservoirs that held oil and gas in place for tens of millions of years.
We are turning our attention to the potential to re-purpose the Bayu-Undan field in the Timor Sea as a CCS hub for the region. We are looking at a storage capacity of around 10 million tonnes of CO2 per annum in Bayu-Undan once production from the field ceases.
Zero-emission technologies like CCS that make hydrocarbon fuels cleaner are essential to meeting the world’s emissions reduction targets. With around 80 per cent of global primary energy still coming from hydrocarbon fuels – roughly the same as 45 years ago – we must focus on making these fuels cleaner and eventually zero-emissions.
This is critical for PNG and for our industry. At Santos, we are embarking on a very deliberate strategy to produce clean hydrogen first using natural gas and CCS and eventually transition to renewable hydrogen technology, as the technology develops.
I am looking forward to making the most of those opportunities and expanding our presence in Papua New Guinea as we lead the energy transition to a low emissions future. I hope to be up in PNG shortly to speak with you all in person.