The Santos Ltd (ASX: STO) share price is up 1.5% this morning after announcing a PNG deal with PetroChina.

Santos is one of Australia’s largest oil companies and has a 13.5% stake in PNG LNG.

The PNG LNG Project co-venturers announced that a mid-term LNG sale and purchase agreement has been signed to supply PetroChina International (Hong Kong) Corporation Limited with liquefied natural gas (LNG) starting in July 2018.

It will supply 0.45 million tonnes of LNG per year over a three year period. This agreement means that the PNG LNG Project is now contracted to supply seven million tonnes per annum. Long-term contracts have been signed with JERA, Osaka Gas, Sinopec and CPC.

ExxonMobil is negotiating other LNG supply agreements with several interested parties. These agreements could be announced in the near-term and this will increase mid-term sales to 1.3 million tonnes per annum.

The Santos share price has gone up by 88% over the past year with the oil price strengthening. This occurred with a takeover bid being made by Harbour Energy and then being subsequently rejected because the Santos Board thought that the offer undervalued the company. At the moment the company is trading at $6.16 per share around 5% under the offer price.

Yesterday Santos reported its second quarter activities report for the period ending 30 June 2018.

In the production update Santos revealed that its Cooper Basin gas production was up 8% and oil production was up 17% compared to the prior production. Santos also boasted of having the fastest ever gas well drilled in the Cooper, taking 3.1 days ‘from spud to rig release’.

This extra production led to first half sales revenue increasing by 16% to US$1.7 billion thanks to stronger commodity prices and higher oil prices. The oil price Santos achieved a year ago was US$54.8 per barrel and this year it’s $75.4, so far.

Santos’ Managing Director and CEO Kevin Gallagher said: “Santos’ strategy has been to establish a low cost operating model that is designed to deliver strong cash flows through the oil price cycle.”

The oil company has announced a plan to return to sustainable dividends by targeting a payout range of 10% to 30% of free cash flow per annum.