Papua New Guinea in advanced talks with Chinese banks to fund its stakes in LNG megaprojects

Papua New Guinea’s state-owned petroleum company is in advanced talks with Chinese banks to help fund its stakes in the two major liquefied natural gas (LNG) projects in the country, a senior executive said on Monday.

Kumul Petroleum is holding talks with banks in the U.S., Europe, and Australia, but its managing director Wapu Sonk said talks with Chinese banks had gone further as they had fewer concerns around fossil fuel development.

“Most of the funding discussions are really with Chinese backed banks because they have a different view on ESG,” he said, referring to environmental, social, and governance issues.

“It’s progressed to a point where it is mature,” Sonk told Reuters at a Papua New Guinea resources and energy conference in Sydney. The Bank of China, ICBC, and Bank of Communications were among those involved, he said.

The state-owned venture must raise roughly $1.34 billion to buy the remainder of a 5% stake in the PNG LNG project from Santos and fund a 22.5% share of the Papua LNG project once it is approved next year, Sonk said. The resource rich but impoverished South Pacific nation is looking to boost foreign investment and trade amid a jostle for influence in the region between the United States and China.

The country signed a security agreement with neighbour Australia last week. Australian banks had shied away from financing the fossil fuel PNG LNG project stake, but Sonk said carbon capture included in the Papua LNG project could make it more attractive.

“We would like the Australians to come on board,” he said, adding that Kumul was in talks with ANZ Group (ANZ.AX) and Export Finance Australia. The 5.4 million tonnes per year Papua LNG project is a joint venture between TotalEnergies, ExxonMobil, Santos and Kumul Petroleum. In September, Kumul Petroleum bought a 2.6% stake in PNG LNG from Santos for $736 million. It has an option for a further 2.4% that expires in the middle of next year.

Sonk said he was confident Kumul would meet that deadline and would also have funding in place to participate in Papua LNG when a final investment decision is made in 2024. Petroleum Minister Kerenga Kua told Reuters there should be flexibility for the country if it misses next year’s deadline.