The research note, released yesterday, says the Adelaide company will make an announcement “in the near future” about buying back into the PNG joint venture, which aims to deliver gas from PNG’s Southern Highlands into eastern Australia.

Macquarie says it expects Santos to take large amounts of PNG gas through its Moomba facilities for the next 15 years.

“We believe the Santos ‘back-in’ to the PNG gas project is a positive for both Santos and the other joint venture partners,” the report says.

Santos declined to comment.

Santos has a 25% stake in the Hides gas fields, which are close to the fields currently linked with the PNG Gas Project, so the company has long been seen as a likely partner in the development.

However, PNG Gas will ensure that Australian gas prices remain low by world standards and will compete with Santos’ conventional gas and coal seam methane projects.

The company also needs to find more liquids-rich gas to extend the life of its Moomba plant beyond the projected life of Cooper Basin gas fields, which are in rapid decline.

At first, the PNG Government wanted to see liquids kept in PNG for processing, but it is believed to have changed its mind on this issue.

It is understood that the deal currently being finalised would involve 60 petajoules of liquids-rich gas being exported to Moomba, but this could drop to 50PJ if a PNG LPG plant is developed, according to a report in today’s Australian newspaper.

If a significant proportion of the liquids could be processed in Australia, Santos would have a strong motivation for becoming a partner in the PNG project. It could monetise its stake in the Hides fields and extend the life of Moomba.

Increasingly, analysts are tipping Santos to join the project. If it does become a partner, Santos’ stake will probably between 7 and 10%, but all stakes in the project will be adjusted once the PNG Government buys into the development. The government is expected to take between 15% and 30% equity.