Treasurer Jim Chalmers and the Foreign Investment Review Board were considered the key hurdle to the takeover deal going through, due to the perceived risk of handing over Australian energy infrastructure to foreign owners at a time when domestic shortfalls are looming.
Santos, which makes most of its money producing and exporting super-chilled LNG from Queensland, Darwin and Papua New Guinea, is also a key supplier of domestic gas used by millions of homes and businesses in Australia, with operations across eastern and Western Australia.
Santos chief executive Kevin Gallagher.Credit: Ben Searcy
XRG, the foreign investment arm of ADNOC, had expressed an eagerness to acquire Santos’s assets in Australia and overseas to gain greater exposure to liquefied natural gas (LNG) and Asia’s fast-growing demand for shipments of the fuel. But it had also stressed it was well aware of the need to ensure the reliable flow of domestic gas for consumers in Australia, where legacy gas fields in Bass Strait continue to be rapidly depleted with scant new supplies available to replace them.
This week, the consortium pointed out that it had repeatedly made public commitments to developing future gas supplies for the Australian market if the deal had proceeded.
“As we said all along, developing more domestic gas needs investors who can bring capital, complementary expertise and long-term commitment,” a spokesperson said. “That is what XRG and its partners had sought to bring.”
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The consortium had reached an indicative deal to buy Santos in June, but a “combination of factors” encountered in the due diligence process had altered its original assessment of Santos’ value and discouraged it from making a final binding offer, said XRG.
“While disappointed not to move forward, XRG and its consortium partners are responsible, disciplined investors with a clear focus on creating value for our shareholders and driving long-term growth,” it said.
Sources on both sides of the negotiations, not authorised to speak publicly, also pointed to friction caused by Santos’ push for the consortium to take on a multimillion-dollar tax bill that must be paid to the Papua New Guinea government in 2026.
Gallagher on Friday insisted withdrawal of the consortium’s $30 billion offer did not represent a failure as Santos did not have the “for-sale sign” up.
“Who failed? We’re not actively out selling the company, so we haven’t failed,” he said.
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