Woodside and Santos merger talks collapse

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AUSTRALIA’S Santos and Woodside have ended merger talks, ruling out their creation of a unified US$52bn LNG firm.

The energy majors announced today that months of negotiations have come to naught, with Santos releasing a statement saying that a “sufficient combination of benefits were not identified”.

The pair began talks following a spate of consolidation in the oil and gas industry, including ExxonMobil and Chevron each investing billions made on the back of high energy prices to buy smaller companies in the sector. On top of this, Santos has come under pressure to divide the company in two with an activist investor saying it would get more value from creating a standalone LNG business.

Santos operates projects that produce gas for sale in Australia and overseas. This includes the Gladstone project on Curtis Island in Queensland where a two-train liquefaction plant cools gas into LNG which is then shipped to Asia. It also operates the single-train Darwin LNG facility in the Northern Territory which processes gas piped in from the undersea Bayu-Undan field 500 km away near Timor-Leste. Bayu-Undan is running dry, so Santos plans to supply its Darwin facility with gas from another offshore field. The plan has proved contentious because the field, Barossa, has high concentrations of CO2. Santos is looking into capturing these emissions and storing them in the empty Bayu-Undan field, with an investment decision expected in 2025.

Woodside, which is the larger of the two companies, operates the Pluto LNG plant in Western Australia where it plans to add a second train that is expected to begin operations in 2026. It also operates the North West Shelf project in Western Australia, a five-train facility that was the country’s first LNG project. In 2022, Woodside expanded its operations through a merger with BHP’s oil and gas business.

"We continue to be disciplined in our approach to mergers and acquisitions,” said Woodside CEO Meg O'Neill. “While the discussions with Santos did not result in a transaction, Woodside considers that the global LNG sector provides significant potential for value creation.”