ADNOC Bids $18.7 Billion for Santos as Canberra Moves to Tax LNG Exports

ADNOC Bids $18.7 Billion for Santos as Canberra Moves to Tax LNG Exports A Gulf sovereign bid for Australia's top gas producer collides with a proposed 25% export tax that Santos says has damaged the country's investment reputation. Santos shares jumped 15.23% on Monday after an Abu Dhabi National Oil Company-led consortium tabled a non-binding takeover offer at $18.72 billion. CNBC reported the bid at A$8.89 per share, a 27.73% premium to the previous close of A$6.96. LSEG data showed it was the stock's biggest intraday move since April 2020.⁵ That bid arrived in the same week Canberra signalled it would extend its gas reservation scheme to cover existing LNG contracts and impose a 25% gas-export tax. Santos's chief executive said publicly that the proposal had damaged Australia's reputation as a stable destination for energy investment. For a company already dealing with a 1.8% drop in first-quarter sales revenue, a Barossa offshore outage and a severe tropical cyclone that disrupted operations at three west coast facilities, the regulatory shift adds a new layer of risk.^4,2 The ADNOC bid reads differently depending on which problem you think it solves. For Abu Dhabi, buying Australian gas assets makes strategic sense when Hormuz has redirected global LNG trade. Santos is the biggest supplier of natural gas in Australia and holds LNG, pipeline gas and oil assets across the Cooper Basin, Queensland, Papua New Guinea and Western Australia. It is pushing ahead with the Barossa LNG project and has just approved the Agogo tie-in in PNG through the PNG LNG joint venture, in which it holds a 39.9% stake.^7,4⁶ For Santos shareholders, the premium looks generous against a weakening financial trajectory. Full-year 2025 revenue fell 8.21% to $4.94 billion from $5.38 billion. Earnings dropped 33.17% to $818 million. The cyclone that hit Australia's west coast affected Chevron's Gorgon platform, which has capacity to produce 15.6 million tonnes of LNG annually, along with two other facilities. Santos was caught in the same weather system.^4,2 Australia's domestic gas problem is what makes the reservation scheme politically viable. Wood Mackenzie warned that a combination of rising seasonal demand and maturing supply sources means the east coast faces tightening domestic supply without significant new reserves. The pandemic and oil price crash delayed critical projects: APLNG cut around US$250 million in capex, Beach deferred the Otway development by a year, and government approvals slowed. The new supply that was supposed to bridge the gap has not materialised.³ Extending reservation requirements to existing contracts rather than just new ones would retroactively alter the economics of deals that were signed when Canberra favoured maximising export volumes. LNG export terminals built over the past decade have competed for the same gas that feeds domestic power generation and industry. The reservation scheme forces producers to redirect molecules toward the domestic market, reducing export availability at a moment when Asian buyers are scrambling for non-Middle Eastern supply.³ That scramble is reshaping trade flows across the region. The prime ministers of Australia and Japan recently signed an energy cooperation agreement covering LNG and critical mineral supply chains. Australia is Japan's top LNG supplier. A reservation scheme that constrains export volumes undermines the deal both governments just signed.² Montel reported separately that Italy is considering state-backed long-term US LNG contracts to supply gas-intensive industries at discounted prices. A consortium of Italian companies would buy LNG under end-to-end deals for regasification at the 5 billion cubic metre Ravenna terminal. Consuming nations are locking in non-Gulf supply wherever they can find it. Australia should be a beneficiary. The export tax makes that harder.¹ Santos shares have risen over the past three months as the company advances Barossa and manages commodity price exposure. At a recent quote of about A$7.89 before the ADNOC approach, the stock had posted a rough three-month gain. The bid premium bakes in a view that Australian gas assets are worth more than the market was pricing, even with the regulatory overhang.⁶ The question now is whether ADNOC moves to a binding offer and how Canberra's policy develops around it. A sovereign acquirer from a Hormuz-affected Gulf state taking control of Australia's largest domestic gas supplier while the government simultaneously restricts exports would test the limits of foreign investment screening. Every month of policy uncertainty is a month where capital allocation decisions shift to Qatar, Mozambique or the US Gulf Coast.