Woodside Energy and Santos in Talks to Forge $52 bn Global Energy Giant

Santos and Woodside Energy

Australia’s energy landscape faces a potential seismic shift as Woodside Energy and Santos confirm they are in early discussions to establish an industry-transforming entity valued at A$80 billion ($52 billion). The proposed merger between these two major players in Australia’s oil and gas sector signals a significant consolidation amid a global trend of industry reshaping and market volatility.

If combined, this initiative would mark the largest corporate deal in Australia in recent years, catalyzing a powerful partnership that seeks to leverage opportunities in the evolving energy market. Both entities emphasized that the discussions are preliminary and confidential, emphasizing the absence of certainty regarding the finalization of any agreement.

Woodside Energy, with a market capitalization of A$56.91 billion, stands as the larger entity compared to Santos, valued at A$22.1 billion. The potential merger aims to create the country’s leading liquefied natural gas (LNG) producer, a strategic move in a nation ranked as the world’s second-largest LNG exporter, Reuters news report said.

However, the consolidation comes at a crucial juncture as both companies confront the challenges of transitioning towards decarbonization while managing ongoing project complexities. Woodside has witnessed a 15.4 percent decline in its share price this year, while Santos has experienced a 4.3 percent downturn, reflecting the industry’s current pressures.

Combined, the oil and gas production of these entities exceeds 260 million barrels of oil equivalent, with proven plus probable reserves totaling 5.39 million BOE based on 2022 data. Should the merger proceed, an annual sales volume of 60 million metric tons in LNG is anticipated, positioning the unified entity as a formidable force in the global market.

Industry analysts foresee potential benefits from this merger, anticipating enhanced negotiating leverage with buyers and greater optimization capabilities within the LNG portfolio. However, such a significant amalgamation is likely to face scrutiny from Australia’s competition watchdog, considering the impact on market competitiveness.

This move aligns with recent trends in the global oil and gas sector, with major players like Exxon Mobil Corp and Chevron making substantial acquisitions, emphasizing a strategic consolidation within the industry.

For Woodside, this initiative follows its recent merger with BHP Group’s oil and gas business, while Santos’ acquisition of Oil Search further underscores the sector’s strategic realignment.

As these discussions progress, both Woodside and Santos aim to navigate regulatory hurdles and capitalize on the promising prospects of the energy transition while addressing the challenges posed by escalating capital expenditure and regulatory complexities. The potential merger signifies a pivotal moment for the Australian energy sector, signaling a concerted effort to fortify competitiveness and navigate the evolving global energy landscape.