Arabian Post Staff -Dubai
Abu Dhabi National Oil Company, via its XRG investment arm, has launched an A$8.89‑per‑share all‑cash takeover offer worth roughly US$18.7 billion for Santos, Australia’s second‑largest gas producer. The bid has ignited intense scrutiny from Australian regulators concerned about safeguarding domestic gas supply and securing critical infrastructure. Simultaneously, XRG has pledged to accelerate key gas‑project development, a strategy aimed at wining over skeptical authorities and stakeholders.
The takeover offer emerges at a pivotal moment: Santos’ shares closed at A$7.73 following the announcement, indicating investor scepticism over regulatory clearance, even as the A$8.89 bid reflects a healthy 28 per cent premium. Jamie Hannah, deputy head at VanEck Australia, acknowledged that while the path ahead “is not going to be smooth sailing”, the “very attractive” straight‑cash offer underscores its appeal.
Regulatory risk centres on the critical role Santos plays in Australia’s energy system. The firm possesses about 5 per cent of eastern and 24 per cent of western domestic gas market share, essential for supplying both export and local needs. Analysts warn that the Foreign Investment Review Board, charged with vetting significant foreign acquisitions, will scrutinise ADNOC’s control over gas assets, particularly given concerns of an east‑coast gas shortfall projected by 2027.
Yet ADNOC is banking on its deep financial resources to tip the scales. XRG has emphasised it can fast‑track Santos’ stalled projects, such as Narrabri and Beetaloo, pledging to develop them faster and more robustly than Santos’ previous plan to boost shareholder returns. UBS’s Tom Allen highlighted this strength, saying regulators may view ADNOC’s funding as a delivery mechanism for the gas Australia needs.
The layered bid comes from a consortium that includes not only ADNOC’s XRG, but also Abu Dhabi Development Holding Company and private‑equity giant Carlyle, valuing Santos at some US$36.4 billion including debt – making it the largest all‑cash corporate takeover ever in Australia.
Despite such scale, state‑level political concerns are emerging. South Australia’s Premier Peter Malinauskas and Energy Minister Tom Koutsantonis have called for protections on local jobs, licence control, and keeping Santos’s headquarters in Adelaide. Meanwhile, new state legislation adds weight to ministerial approval of petroleum licence transfers, granting South Australia extra leverage in the process.
At the federal level, Treasurer Jim Chalmers holds the ultimate authority. His decision will rely closely on FIRB advice, with insiders describing it as a pivotal “captain’s call” for the Albanese government. The broader Ministry of Energy and Resources, currently reviewing gas supply strategies, may leverage the bid to extract concessions in line with looming energy security needs.
Santos CEO Kevin Gallagher, whose compensation could wind up exceeding A$50 million if the deal proceeds, has maintained discretion, saying he will “let the process take its course”. Gallagher previously brought forward a stalled bid with Woodside, signalling a strategic interest in consolidation.
Market sentiment remains guarded but not dismissive. Santos shares rallied approximately 11 per cent in the wake of the board’s backing of the bid and release of due‑diligence exclusivity. Analysts point to ADNOC’s deep capital reserves and the trade deal with the UAE as factors that may cushion adversities and lend credence to the offer.
One area of uncertainty is the domestic Narrabri gas project in New South Wales: although Novation from the recent Native Title Tribunal clearance supports its long‑anticipated development, ongoing regulatory review and possible asset spin‑offs to comply with FIRB guidelines could delay its final investment decision. Analysts have speculated that domestic‑facing assets might be excluded or managed separately, potentially involving Carlyle as a local partner to satisfy national interest criteria.
This complex engineering of commercial ambition and governmental oversight places energy security at the centre of the acquisition narrative. While ADNOC’s financial might and project‑acceleration promise may reassure regulators, political and community stakeholders are tightening the lens on national asset control, job retention, and supply resilience. The outcome will hinge on whether FIRB, acting on Chalmers’s counsel, accepts the consortium’s assurances — or opts for a compromise that safeguards domestic gas capacity.
Also published on Medium.
