‘Strong scrutiny’
Santos said the “indicative proposal” by its Abu Dhabi suitor was subject to due diligence, agreement on terms, and approval by regulatory authorities in Australia, Papua New Guinea and the United States.
Approval by Australia’s foreign investment regulator will be a “major issue,” said Saul Kavonic, head of energy research at MST Marquee.
He expected “strong scrutiny” of the deal given that Santos owns critical gas infrastructure on Australia’s east and west coasts, and the Abu Dhabi National Oil Company’s status as a foreign government-owned entity.
It would be Australian Treasurer Jim Chalmers’ first big decision on a foreign government bidding for major critical infrastructure, Kavonic said.
The government may insist that some of Santos’ domestic gas assets be split off as a condition of a takeover, he said.
The Middle East-led consortium said its offer would leave Santos’ headquarters in Adelaide and vowed to work with existing management to accelerate growth and support local jobs.
The group said it planned to invest in Santos’ gas and liquefied natural gas business to provide “reliable and affordable low carbon solutions to customers in Australia, the Asia Pacific and beyond.”
XRG said it would ensure Santos makes investments in carbon capture and storage projects, low carbon fuels and “other decarbonisation initiatives”.
Santos has been a rumoured takeover target for more than two years, said a report by E&P Financial Group.
The timing now felt “opportune” for a takeover offer, it said, with the risks weighing in favour of higher energy prices and Santos having completed some major investment projects.
Last year, Santos and rival Australian energy firm Woodside Energy abandoned talks to create one of the world’s largest natural gas exporters, after failing to reach a deal.