© Reuters. FILE PHOTO: A plant decorates the sales space of Australian petroleum exploration and manufacturing firm Woodside Vitality throughout the LNG 2023 vitality commerce present in Vancouver, British Columbia, Canada, July 13, 2023. REUTERS/Chris Helgren/File Picture
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By Emily Chow
SINGAPORE (Reuters) – Australian vitality firms Woodside (OTC:) and Santos introduced on Dec. 7 they’re in preliminary talks to merge, a tie-up that may come amid a wave of consolidation within the international vitality sector.
If Woodside swallows up Santos, it might be the biggest company deal in Australia for a number of years. The mixed entity would turn into the most important liquefied (LNG) producer in Australia, which is the world’s No. 2 provider of the superchilled gas.
WHAT WOULD THE COMBINED ENTITY LOOK LIKE?
The enlarged Woodside would have a market worth of roughly $50 billion and annual manufacturing of 260 million barrels of oil equal (boe).
LNG would account for 53% of manufacturing, whereas pipeline fuel would take up 24% of output. The remaining 23% of output could be and condensates manufacturing, based mostly on the 2 firms’ manufacturing in 2022.
With Santos within the fold, Woodside would overtake TotalEnergies (EPA:) and Malaysia’s Petronas to turn into the world’s sixth largest LNG producer, with output at over 16 million metric tons per 12 months.
The LNG powerhouse would rank solely behind QatarEnergy, Cheniere Vitality (NYSE:), Shell (LON:), Exxon Mobil (NYSE:) and Chevron (NYSE:), in line with estimates from analysts together with Bernstein Analysis, based mostly on 2023 manufacturing ranges.
The brand new entity would have property in Australia, Alaska, the Gulf of Mexico, Senegal, Trinidad and Tobago and Papua New Guinea, with abroad output accounting for almost a 3rd of mixed whole manufacturing.
WHICH ASSETS COULD BE SOLD?
Analysts say a merged entity would management about 26% of the fuel market on Australia’s east coast, residence to a lot of the nation’s inhabitants, and 35% in Western Australia, which might draw concern from the nation’s competitors regulator.
The Australian Competitors and Shopper Fee (ACCC) stated it might think about whether or not a public merger evaluation into the influence on competitors was required if the deal goes forward.
A supply near the merger talks stated the businesses might overcome regulatory issues by promoting some smaller home property. Analysts stated Santos’ Varanus Island asset in Western Australia, and its Cooper Basin fuel enterprise on the east coast could possibly be candidates on the market.
Woodside has been seeking to promote its stakes within the mature Macedon fuel area and Pyrenees oil challenge off Western Australia, the Australian Monetary Evaluate reported. Each of these property are co-owned by Santos.
WHAT WOULD BE THE IMPACT ON THE GLOBAL LNG MARKET?
With Australia in shut proximity to high LNG patrons in northeast Asia, the merged group would have extra bargaining energy when coping with patrons, given its greater portfolio with extra supply choices and suppleness from extra terminals, analysts stated.
The mixed group would function 4 LNG crops in Australia – North West Shelf, Pluto, Darwin and Gladstone, and have a stake in Chevron-led Wheatstone.
For Woodside the large prize could be main stakes within the two LNG tasks in Papua New Guinea – Exxon-led PNG LNG and TotalEnergies-led Papua LNG, which is up for a closing funding resolution in 2024.
“It will give the new company a greater capacity to invest, but I think the bigger impact will be in creating a larger LNG portfolio player which will be able to challenge the oil majors through multiple LNG export hubs,” stated Bernstein analyst Neil Beveridge.
Offtakers of LNG from Woodside and Santos tasks embrace Japan’s JERA, Tokyo Gasoline and South Korea’s Kogas.
