(Adds PNG concerns, background and further details of deal)
Sept 10 (Reuters) - Santos (STO) sealed an agreement to buy Oil Search (OSH) to create a global top 20 oil and gas company, the companies said on Friday, even as the Papua New Guinea government raised concerns that a takeover could harm national interests.
The potential deal values PNG-focused Oil Search at about A$8.4 billion ($6.19 billion), but still requires an approval from the government.
In a statement late Thursday that outlined more specific concerns, Deputy Prime Minister Samuel Basil said the merger may hurt the local market.
He highlighted the potential impact of job losses, lower market liquidity and loss of local ownership among other reasons.
The deal will make Australia's Santos the largest shareholder in the country's biggest resource project, the PNG LNG project, operated by Exxon Mobil Corp XOM.N .
Oil Search shareholders, who will receive 0.6275 shares in Santos for each they own, will hold around 38.5% in the new combined company.
Santos expects up to $115 million in pre-tax cost savings from the deal, and its boss said last month the new A$21 billion company will help weather the energy transition better.
In another major local oil deal, Woodside Petroleum (WPL) proposed a $29 billion merger with the petroleum arm of the world's biggest-listed miner BHP Group (BHP) in August.
($1 = 1.3572 Australian dollars)
