Santos Ltd’s board of directors has endorsed a US $18.7 billion cash offer from an Abu Dhabi-led consortium, pledging immediate relief for stretched gas markets but plunging Australia into a high-stakes national interest conflict.
The bid, sponsored by ADNOC’s investment arm XRG alongside ADQ and Carlyle, offers A$8.89 per share—a 28 per cent premium to Santos’s market value—while assuming A$36.4 billion in enterprise debt. It marks the largest all‑cash takeover ever in Australia.
Investors have reacted with caution: Santos shares rallied nearly 11 per cent upon news of the bid but remain significantly below the offer price, reflecting deep concern over regulatory approval. Analysts warn that the deal’s fate now hinges on the Foreign Investment Review Board and Treasurer Jim Chalmers, whose approval will weigh economic gain against strategic control of critical energy infrastructure.
Proponents emphasise that ADNOC’s financial strength can catalyse development of Santos’s undeveloped assets—including Narrabri and shale projects like Beetaloo—and help mitigate an anticipated east‑coast gas shortage by 2027. With ADNOC targeting 20–25 million tonnes per annum of LNG capacity by 2035, acquiring Santos’s stakes in Gladstone, Darwin and PNG LNG represents a strategic alignment for both parties.
However, a chorus of concern has emerged over the implications for domestic energy sovereignty. The high concentration of export‑oriented gas supply—over 70 per cent in Queensland—raises alarms that ADNOC might prioritise LNG sales over local consumption, deepening east‑coast supply pressures. RenewEconomy warns that “if ADNOC’s focus is primarily on LNG markets, it will likely seek to export as much gas as possible”.
Australian Energy Producers, which counts Santos CEO Kevin Gallagher as a board member, has yet to publicly weigh in, but the Australian Energy Market Operator has flagged potential domestic shortfalls by late decade if projects like Barossa and Narrabri are delayed.
Political figures are sharpening oversight. South Australia’s energy minister, Tom Koutsantonis, invoked state power to oversee licence transfers, while Treasurer Chalmers cautioned that the deal “would be a big decision” and pledged not to pre‑empt FIRB’s findings.
Historical precedents include the federal government blocking Shell’s bid for Woodside in 2001 and the NSW Ausgrid sale in 2016—illustrating a willingness to restrict foreign control of strategic infrastructure.
From Adelaide to Canberra, voices across politics and industry are watching keenly. South Australian Premier Peter Malinauskas stressed that the headquarters and local workforce must be retained; this position is reinforced by new state laws granting oversight over petroleum licence assignments.
On the investor side, divergent assessments persist. UBS analysts see ADNOC’s deep pockets as a positive, while others like Evans & Partners downgraded Santos stock, suggesting investors might prefer Woodside, citing superior oil market positioning.
The bid aligns with Australia‑UAE economic ties following a free trade agreement, yet regulatory scrutiny is expected to be heightened due to the sovereign‑state nature of ADNOC.
Approval would mark a milestone in Australia’s economic evolution, yet rejection—or imposition of conditions like domestic supply carve‑outs—could serve as a policy catalyst in securing energy infrastructure for public benefit.
This takeover bid places domestic energy security at the centre of policymaking, challenging Australia to find balance between foreign investment and safeguarding its energy future.
