The investment arm of Abu Dhabi’s state-owned oil company has dropped its nearly $30 billion takeover bid for Australian gas giant, Santos.
Santos has oil and gas assets in the Cooper Basin in far north-eastern South Australia, Gladstone in Queensland, and across Western Australia and Papua New Guinea.
The proposed takeover would have been the biggest-ever cash-only takeover in Australian history.
In a statement, the consortium said it “maintains a positive view of the Santos business” and “a combination of factors, when considered collectively, have affected its assessment of its indicative offer”.
The announcement comes after the ABC revealed a major methane leak at a Darwin gas plant was kept secret from the public for almost 20 years, in what environmentalists and federal crossbenchers say is a national scandal.
The Abu Dhabi National Oil Company did not respond to questions earlier this month from the ABC about the leak — but it and its partners were reportedly taken by surprise by the development.
NT official takes side job with miner amid calls to step down over gas leak ‘scandal’
In a statement, Santos said it expected to enter into an agreement on or before September 19, after previously agreeing to a four-week extension in late August.
It said the board had expressed its concern to the XRG-led consortium about delays in agreeing to the agreement.
“The XRG Consortium would not agree to acceptable terms which protected the value of the potential transaction for Santos shareholders,” it said in an ASX announcement.
It also said the consortium “would not agree to an appropriate allocation of risk between the XRG Consortium and Santos shareholders under the SIA (scheme implementation agreement)”.
“This included the obligation of the XRG Consortium to secure regulatory approvals and the provision of a reasonable commitment to the development and supply of domestic gas,” they said.
Among Santos’ assets is the plant in Moomba, in far north-eastern South Australia. (ABC News: Brant Cumming)
XRG said it was “disappointed”, but after evaluation decided not to move forward.
The Minister for Energy and Mining, Tom Koutsantonis, had previously threatened to intervene in the takeover, if it was “not in the interests of South Australians”, under legislative powers which required “consent for change of licence ownership in the resources sector”.
Premier Peter Malinauskas told ABC Radio Adelaide’s Breakfast program he did not believe the state government’s previous threats to intervene influenced the bid being dropped.
“I’m advised it didn’t … and that was specifically communicated to me last night by XRG themselves,” he said.
“Even if hypothetically, it did, and we have no reason to believe that was the case, but if it did, I make no apologies for it.
“Because my responsibility isn’t to Santos shareholders, my responsibility is to the 1.7 million people that live in [South Australia].”
Peter Malinauskas says he has been assured the state government hasn’t influenced XRG’s bid for Santos being dropped. (ABC News: Justin Hewitson)
Mr Koutsantonis said there were assessments ongoing about whether a deal was in the state’s interests, but it would not get to that point now the bid had fallen over.
“But this doesn’t mean it’s over, Santos is internationally renowned as a good asset,” he said.
“It has lots of potential for growth, I suspect this won’t be the last we see.”
Bid failure raises ‘red flags’
MST Financial’s senior energy analyst Saul Kavonic said it was the second time a bidder had walked during the due diligence process in the last two years, after a failed merger between the energy giant and Woodside in 2024.
“That’s going to be leaving a number of investors wondering what’s wrong with Santos,” he said.
“The risk that could be here is that one, there is some issues with some of their assets, and secondly, there could be an issue with some of Santos’ behaviour which is actually holding them back from opportunities.”
“This is a sign that Santos probably does need to change.”
Mr Kavonic said it was “unusual” to have a bidder walk away from a deal so far into the process.
“To see two bidders do this in the space of as many years is very rare, and does raise a number of red flags,” he said.
Josh Runciman says there was a “fairly lengthy due diligence process”. (ABC News)
The Institute for Energy, Economics and Financial Analysis’s lead analyst for Australian Gas, Josh Runciman, said he believed there were a “couple of factors” that had led to the consortium having “effectively decided that the business just isn’t worth it”.
“So firstly, some concerns from Abu Dhabi around a tax liability that Santos faces next year in Papua New Guinea, that was raised as something that ADNOC would have to take on and that was raised fairly late in the piece,” he said.
Mr Runciman said there were also “broader concerns” around Santos’s assets, most of which he said were “a bit older”.
Another key factor, according to Mr Runciman, was concern “about some of the emissions bit as well”.
“So Santos’s Darwin LNG facility, for instance, was found recently to have been leaking methane,” he said.
“We know that that was a concern as well.”
He said there were also “potentially some other concerns as well around the domestic market side of things”, including a key contract SANTOS has out of its Gladstone facility to supply LNG to KOGAS due to expire in 2031.
“And so I think that a range of factors have basically led Abu Dhabi to walk away from it,” he said.