The South Australian government has reportedly outlined several key conditions for the proposed $36 billion takeover of Santos Ltd (ASX:STO) by an Abu Dhabi-led consortium, demanding that the buyers commit to maintaining Santos’ headquarters in Adelaide and make significant investments in local infrastructure.
SA Energy Minister Tom Koutsantonis also said the state government wants the consortium — led by XRG, the Abu Dhabi National Oil Company (ADNOC)’s international investment arm — to sign a formal agreement memorialising specific guarantees before it will back the deal, the Australian Financial Review reported on Monday. ADNOC has publicly signalled that it would meet those terms.
The conditions highlight the state's significant interest in the takeover and its broader economic implications, particularly in terms of local employment and infrastructure investment.
Government demands for Santos' future in Adelaide
Koutsantonis’ comments followed a June 19 statement from the SA government calling for assurances from ADNOC and its bidding partner, US private equity firm Carlyle, regarding the future of Santos' headquarters and operations in Adelaide. According to the AFR, the minister expressed concerns about the potential sidelining of the Cooper Basin, which is central to Santos' operations, within ADNOC's global operations.
“Cooper is massive for Australia, and small for them, which gives me great concern,” he reportedly said.
The comments echoed the government’s official statement, which stressed the need for ADNOC to commit to reinvesting in the Cooper Basin and other critical energy infrastructure within the state. It also highlighted that any deal would need to safeguard employment levels and economic activity, ensuring the takeover aligns with South Australia’s energy security and broader economic interests.
ADNOC-led consortium's bid and valuation concerns
The latest salvo from the state government comes amid ongoing discussions surrounding ADNOC’s $36 billion bid for Santos, first reported in early June. Analysts have raised concerns about the bid’s valuation, with some arguing that the offer undervalues Santos, particularly given the scale of its domestic operations.
The South Australian government’s focus on job security and infrastructure investment underscores the strategic role Santos plays in the local economy. The government's position reflects broader national concerns about the implications of foreign ownership of key Australian assets, a theme that has been central to past debates over major energy sector deals, including those involving Shell and Woodside.
Evaluating the deal’s impact
In addition to focusing on headquarters retention and job security, the South Australian government is conducting a cost-benefit analysis to assess the impact of the takeover on domestic gas supply, investment in the Cooper Basin, and local pipeline infrastructure. Concerns have been raised that the sale could lead to a shift in focus toward liquefied natural gas (LNG) exports, which could impact the availability of gas for domestic consumers and affect local energy prices.
The government has made it clear that any approval of the takeover will be contingent on ADNOC addressing these concerns, particularly around maintaining a stable domestic energy supply and ensuring continued investment in South Australia’s energy infrastructure.
The Santos takeover will require a series of approvals before it can proceed. Treasurer Jim Chalmers will need to sign off on the deal, along with other regulatory bodies, including the Foreign Investment Review Board (FIRB), which assesses foreign acquisitions of Australian companies.
In addition to domestic regulatory hurdles, the deal also requires approval from the US and Papua New Guinea, given Santos’ operations in those countries.