ADNOC’s Takeover Proposal For Australia’s Biggest Energy Group Raises National Concerns

ADNOC founded XRG to invest in low-carbon, chemical, and natural gas projects. Santos would be a good fit for the plan given its development of gas fields.

Abu Dhabi’s national oil company, ADNOC, has launched a $19 billion proposal to buy one of Australia’s biggest energy groups.

The company Santos, also known as South Australian Northern Territory Oil Search, may have finally found a match.

Santos stated that XRG, the ADNOC investment arm, valued the Adelaide-based business at $18.7 billion and offered a cash offer of $5.76 per share. It is a 28% increase over Santos’s closing share price from the previous week.

As South Australia’s government and commercial center, Adelaide is the site of many governmental and financial institutions.

After years of poor performance, unfulfilled promises, and unsuccessful takeover efforts, the 71-year-old company finally raised a white flag, advising shareholders to accept a $36 billion buyout bid from a foreign government.

Data published by Dealogic claims that if the deal gets closed, it would be the largest buyout of an Australian company, based on the cash paid and total deal size of $22 billion, including debt.

The deal would surpass the sale of Sydney Airport to infrastructure investors, the purchase of AirTrunk by Blackstone, and the merger of BHP’s and Woodside’s oil and gas businesses.

It is a takeover deal that the three most recent prime ministers of the last decade resent as the sale of crucial national infrastructure is not in the best interest of the citizens.

Then, there is a sticky situation of switching to renewable energy sources from gas to achieve their net-zero emission goals.

Nonetheless, for the deal to pass through, the buyer must overcome regulatory hurdles, offering the federal government a once-in-a-lifetime opportunity to secure domestic supply.

Australia and the United Arab Emirates signed a free trade agreement last year as part of a stronger agricultural partnership. Since Santos was a significant provider to Australia’s domestic gas market, analysts at Citi warned that the Foreign Investment Review Board could still present XRG with a “significant hurdle.”

Australia’s treasurer, Jim Chalmers, who will have the last say over the deal, stated that the decision regarding the acquisition of Santos is a “big decision” for the country, but he would not overrule the review board’s decision.

ADNOC founded XRG to invest in global energy assets, with a major focus on low-carbon, chemical, and natural gas.

Santos would be a good fit for the plan given its development of gas fields and carbon capture and storage assets, such as the Moomba field in South Australia.

ADNOC’s CEO, Sultan Al Jaber, stated that XRG has an enterprise value of “over $80 billion” and that the company aimed to double the value of its assets over the following ten years.

Bernard Looney, the former chief executive officer (CEO) of the oil giant BP, is a member of the XRG board.

The part Santos has played in depleting the East Coast’s gas supply is arguably the most controversial topic for the treasurer.

It provided countless inexpensive gas from the Cooper Eromanga Basin from the desert borders of Queensland, South Australia, New South Wales, and the Northern Territory for decades.

However, it joined the movement to start exporting from the East Coast about 15 years ago. After discovering enormous amounts of coal seam gas in Queensland, it constructed a massive liquified natural gas (LNG) facility on Curtis Island.

However, it found it challenging to extract the gas, and after securing long-term contracts in Asia, it had to export the gas that had previously fueled the domestic market, which caused gas prices to skyrocket.