The Santos share price finished the session at $8.35, up 1.7%, and has now climbed around 35% since the start of 2026.

With the stock already trading close to its 52-week high, investors will be watching closely to see how the market reacts to the company's latest move in Papua New Guinea.

Here's what we know.

Santos is increasing its exposure

Santos has agreed to spend around US$189 million, or roughly $262 million, to buy another 3.3% of the Papua LNG project from TotalEnergies SE (NYSE: TTE).

Once the Papua New Guinea Government's planned back-in is taken into account, Santos expects its stake to increase from 17.7% to 21%.

The deal is still subject to regulatory approvals and the project reaching a final investment decision, which is currently targeted for the fourth quarter of 2026.

If everything goes ahead, Santos expects its share of LNG production from Papua LNG to rise by around 19% to about 1.2 million tonnes a year.

There's also a change at the top of the project, with ExxonMobil set to take over as operator from TotalEnergies and increase its own interest to 34.1%.

Santos believes having ExxonMobil operate both Papua LNG and the existing PNG LNG project could improve efficiency and help with execution.

CEO Kevin Gallagher said the deal gives Santos a larger position in a project the company sees as part of its next stage of growth, alongside Barossa and Pikka.

Gas policy is back in focus

The Papua LNG deal is not the only thing Santos investors have to watch this week.

The Australian reported today that Australia Pacific LNG wants exporters blocked from buying domestic gas to meet export commitments under the Federal Government's proposed reservation scheme.

APLNG chief executive Dan Clark also warned that the proposed 20% reservation target could discourage investment in new supply.

Santos has raised similar concerns, arguing that pushing too much gas into the domestic market could lower prices in the short term but make future projects less attractive.

But the debate could get more attention tomorrow, when Santos CEO Kevin Gallagher speaks at the National Press Club.

Is there much upside left?

After a 35% rise this year, Santos shares are already trading close to their 52-week high.

TipRanks shows an average 12-month price target of $8.44, only slightly above Monday's close. Six of the eight analysts shown still rate the stock as a buy, with the other two on hold.

That still leaves brokers broadly positive on Santos, although the average target is only a touch above the current share price.

The post Santos shares on watch after major Papua LNG deal appeared first on The Motley Fool Australia.