Australia’s treasurer, Jim Chalmers, may soon confront a pivotal decision: whether to approve a $30 billion takeover bid for Santos, the nation’s largest oil and gas producer, by a consortium led by Abu Dhabi’s state-owned investment arm. The proposal has won unanimous backing from Santos’s board but remains contingent on complex regulatory approvals, including a critical Foreign Investment Review Board (FIRB) recommendation and ministerial consent. At stake are strategic energy assets, domestic gas security, and precedent for foreign investment under the re-elected Labor government.
Background: Santos’s Standing in the Energy Sector
Founded in 1954 as South Australia and Northern Territory Oil Search, Santos is now South Australia’s biggest company and among the top 20 by market capitalization on the ASX. Its asset portfolio spans the onshore Cooper Basin, Queensland’s LNG hubs near Gladstone, Western Australia’s Carnarvon Basin, and offshore operations in Papua New Guinea. Santos also owns critical domestic gas infrastructure—pipelines, processing facilities, and export terminals—that underpin energy supply to millions of Australian homes and businesses.
The Abu Dhabi-Led Consortium’s Proposal
On June 17, Santos informed the ASX it had received a non-binding expression of interest from XRG, the investment arm of Abu Dhabi National Oil Company (ADNOC), in partnership with U.S. private equity firm Carlyle. The consortium offered $8.89 per share, a 28 percent premium to Santos’s closing price prior to the announcement, valuing the company at approximately $28.8 billion.
Key elements of the proposal include:
• Acquisition of 100 percent of Santos shares at $8.89 each.
• Maintenance of Santos’s headquarters in Adelaide, preserving hundreds of corporate jobs.
• Commitment to accelerate investment in domestic operations and technologies such as carbon capture and low-carbon fuels.
• Pledge to uphold existing brand and operational footprint in Australia and key international hubs.
Santos’s board signaled its intent to unanimously recommend the scheme in the absence of a higher offer, conditional on satisfactory due diligence, a binding scheme implementation agreement, and requisite approvals.
State Government Perspective: South Australia’s Levers
South Australian Premier Peter Malinauskas welcomed initial consultations with XRG leadership, emphasizing the government’s legislative tools to influence resource sector transactions. Energy Minister Tom Koutsantonis noted recent state law requiring ministerial consent for changes in controlling interests of resource licences, ensuring Adelaide retains a voice in any deal that affects state assets.
“We’re going to fight to keep it here,” Koutsantonis said. “If this deal is not in the interests of South Australians, the state government will act accordingly.”
Federal Government and FIRB Process
Under national regulation, any transaction exceeding a monetary threshold or involving critical infrastructure demands FIRB scrutiny, with final approval by the treasurer. Jim Chalmers has declined to pre-empt FIRB advice, describing the outcome as a “big decision” that may require a direct ministerial “captain’s call.”
Analysts expect FIRB’s evaluation to focus on:
• Impact on domestic gas supply and prices for households and industry.
• Transparency concerns arising from a company ultimately owned by a foreign government.
• Strategic security of pipelines and processing facilities.
• Australia-UAE bilateral relations under their free trade agreement.
Energy Security and Domestic Supply Concerns
Critics warn that transferring key Australian energy assets to ADNOC’s investment arm could concentrate control of gas infrastructure in foreign hands, potentially reducing public oversight and influencing pricing. Santos CEO Declan Brady and XRG representatives counter that enhanced capital flows will bolster production, safeguard domestic supply through reinvestment, and support Australia’s role as a stable exporter in the Asia-Pacific.
Kevin Morrison from the Institute for Energy Economics and Financial Analysis stressed the “national interest” dimension, noting that Australia’s gas market is already highly foreign-owned. He argued that government decision-makers must weigh commercial gains against the public good.
Market Reaction and Share Price Dynamics
The announcement sparked an 11 percent surge in Santos’s share price on Monday, with the stock rising to $7.75 before stabilizing below the offer level. Energy sector equities broadly gained on prospects of consolidation, while bond yields on utility debt eased marginally, reflecting reduced perceived credit risk if the deal proceeds.
Investors are also eyeing potential competing bids, although there have been no public indications of rival approaches. Santos’s board has granted the consortium exclusive due-diligence rights in the coming weeks, suggesting a structured process rather than an open auction.
Analyst Commentary: A “Captain’s Call”
Matthew Haupt, lead portfolio manager at Wilson Asset Management, described the treasurer’s eventual decision as akin to a ship’s captain navigating treacherous waters. FIRB will compile technical assessments on national interest, but the ultimate verdict rests with the minister. If Chalmers deems the proposal beneficial—by securing investment, jobs, and infrastructure upgrades—it may gain approval; otherwise, he could block it.
Other analysts note the absence of an Australian co-investor (such as a superannuation fund) as a potential drawback. A domestic partner might have reinforced arguments around shared stewardship and community alignment.
Government’s Fossil Fuel Stance in Second Term
The Santos bid is the Labor government’s first major foreign investment test since its re-election. It follows recent approvals for new fossil fuel projects, including Woodside’s North West Shelf extension to 2070—decisions that have drawn criticism from climate advocates. Balancing investor confidence, energy security, and climate commitments remains a delicate act for ministers.
Strategic Implications for Australia-UAE Relations
The consortium’s proposal comes against the backdrop of a deepening Australia-UAE partnership. The countries signed a free trade agreement in 2022 and elevated ties through joint exercises and diplomatic exchanges. Approval of the Santos takeover could underscore Australia’s welcoming stance toward Gulf capital, potentially unlocking further investment in mining, infrastructure, and renewables.
Next Steps in the Approval Timeline
- Santos and XRG finalize due diligence and negotiate a binding scheme implementation agreement.
- Submission to FIRB for detailed assessment of national interest factors.
- Consultations with Commonwealth and state ministers, including Defence, Home Affairs, and South Australia’s Department of Energy.
- FIRB’s non-binding recommendation delivered to Treasurer Chalmers.
- Chalmers decides on formal approval, possibly with conditions (e.g., domestic supply guarantees, local board representation).
- If approved, Santos shareholders vote on the scheme in a special meeting; if successful, the transaction proceeds to implementation.
Potential Conditions and Safeguards
Observers anticipate that any government green light would be accompanied by enforceable conditions to:
• Maintain headquarters and significant employment in Adelaide.
• Guarantee minimum levels of domestic gas supply and price transparency.
• Prevent asset stripping or the sale of critical infrastructure without further approvals.
• Ensure environmental and community commitments underpinning existing Santos projects endure.
Conclusion
Jim Chalmers now stands at the intersection of national energy security, foreign investment policy, and economic growth objectives. The Santos takeover bid by an Abu Dhabi-led consortium tests the Labor government’s appetite for large-scale foreign capital in strategic industries. A decision in the coming months will set an important precedent: one that balances Australia’s need for investment and jobs against safeguarding critical energy infrastructure and consumer interests. Whatever the outcome, the “captain’s call” over Santos will resonate across boardrooms, ministerial offices, and gas fields from Adelaide to the Asia-Pacific.
READ MORE: SA Government Poised to Block Santos Takeover if State Interests Are Jeopardised
