Assessing the Impact of ADNOC’s Gas Supply Commitment on Santos’ Takeover Prospects and Share Value

The proposed $19 billion acquisition of Santos Limited by a consortium led by Abu Dhabi National Oil Company (ADNOC) has ignited significant debate about the interplay between strategic risk, regulatory scrutiny, and market dynamics in cross-border energy deals. As the UAE seeks to solidify its position as a global liquefied natural gas (LNG) powerhouse, the Santos takeover represents both an opportunity and a test of ADNOC’s ability to navigate complex geopolitical and regulatory landscapes. This analysis evaluates how ADNOC’s gas supply commitments influence the deal’s prospects, Santos’ share value, and broader implications for energy market stability.

Strategic Implications of ADNOC’s Gas Supply Commitments

ADNOC’s bid for Santos is driven by its ambition to expand its LNG capacity to 20–25 million metric tons per annum (MTPA) by 2035, a goal aligned with global energy demand trends and the UAE’s economic diversification strategy [1]. The consortium’s offer—valued at $5.76 per share, a 28% premium over Santos’ pre-announcement price—grants ADNOC access to Santos’ critical assets, including the Gladstone and Darwin LNG terminals in Australia and stakes in Papua New Guinea’s PNG LNG project [2]. These assets are pivotal for securing long-term supply chains to Asia, where LNG demand is projected to grow by 40% by 2040 [3].

However, the deal’s success hinges on ADNOC’s ability to address regulatory concerns over domestic gas supply in Australia. The Foreign Investment Review Board (FIRB) has emphasized the need for assurances that the acquisition will not compromise Australia’s energy security, particularly amid looming east coast gas shortages by 2029 [4]. To mitigate these risks, the consortium has pledged to retain Santos’ headquarters in Adelaide, maintain domestic gas production, and invest in carbon capture and storage (CCS) projects like the Moomba initiative [5]. Such commitments are critical in aligning the deal with Australia’s national interest, as highlighted by the South Australian government’s requirement for Santos to keep its headquarters in Adelaide to retain onshore gas permits [6].

Regulatory Hurdles and Market Reactions

The Santos takeover faces a labyrinth of regulatory approvals, including assessments by FIRB, Papua New Guinea’s securities commission, and the U.S. Committee on Foreign Investment (CFIUS). These bodies are scrutinizing the deal’s potential to disrupt domestic gas markets and its alignment with geopolitical interests. For instance, the Australian Treasurer, Jim Chalmers, has signaled caution, stating that the decision will depend on FIRB’s evaluation of energy security risks [7].

Market reactions have been mixed. Santos’ shares surged over 15% following the announcement of the bid, reflecting investor optimism about the premium offer and ADNOC’s financial credibility [8]. However, analysts remain divided. While some, like Rystad Energy, argue that ADNOC’s state-owned status could raise red flags over export prioritization, others, such as MST Financial’s Saul Kavonic, suggest that domestic supply carve-outs—particularly for projects like Santos’ Narrabri gas field—could sway regulatory approval [9]. Conversely, firms like Evans & Partners downgraded Santos to “neutral,” citing concerns over ADNOC’s integration capabilities compared to Western majors like TotalEnergies or BP [10].

Comparative Case Studies and Supply Assurance Dynamics

Historical cross-border energy acquisitions underscore the importance of supply assurances in deal outcomes. For example, EOG Resources’ $5.6 billion acquisition of Encino Acquisition Partners in 2024 was driven by securing domestic Utica Shale reserves, a move that bolstered investor confidence in energy security [11]. Similarly, Capital Power’s $2.2 billion purchase of gas-fired power plants in 2025 emphasized the role of reliable supply chains in enhancing grid resilience [12]. These cases illustrate that regulatory approval often hinges on acquirers’ willingness to commit to local infrastructure and supply obligations.

In the Santos context, ADNOC’s pledges to maintain domestic gas production and invest in CCS projects mirror these precedents. However, the consortium’s reliance on Carlyle Group—a U.S. private equity firm—adds a layer of complexity. While Carlyle’s involvement may frame the bid as commercially driven, it also raises questions about long-term operational continuity, particularly if ADNOC’s strategic priorities shift post-acquisition [13].

Strategic Risk and Share Value Volatility

The Santos takeover’s regulatory uncertainty has created volatility in its share price. Despite the 15% surge post-announcement, the stock remains below the $5.76 offer price, reflecting lingering doubts about the deal’s feasibility [14]. This gap highlights the market’s sensitivity to regulatory outcomes, as seen in similar cases like the 2023 Permian Basin acquisitions, where prolonged regulatory delays led to share price corrections [15].

For ADNOC, the risks extend beyond regulatory hurdles. A failed acquisition could undermine its credibility in global energy markets and delay its 2035 LNG targets. Conversely, a successful deal with favorable conditions could position ADNOC as a trusted partner in energy security, potentially unlocking further cross-border opportunities in Asia and Europe [16].

Conclusion

ADNOC’s Santos bid exemplifies the delicate balance between strategic ambition and regulatory pragmatism in cross-border energy acquisitions. While the consortium’s gas supply commitments address key concerns about domestic energy security, the deal’s ultimate success will depend on its ability to satisfy Australia’s stringent regulatory requirements and maintain investor confidence. As global energy markets grapple with decarbonization and geopolitical tensions, the Santos case underscores the growing importance of supply assurances in shaping the future of energy M&A.

Source:
[1] ADNOC Group to Take Longer than Expected in Finalizing Offer for Santos [https://onmine.io/adnoc-group-to-take-longer-than-expected-in-finalizing-offer-for-santos/]
[2] XRG Consortium's non-binding, indicative proposal ... - Santos [https://www.santos.com/news/xrg-consortiums-non-binding-indicative-proposal-to-acquire-santos/]
[3] ADNOC's $18.7B bid for Santos signals UAE's bold LNG expansion backed by ADQ and Carlyle [https://serrarigroup.com/adnocs-18-7b-bid-for-santos-signals-uaes-bold-lng-expansion-backed-by-adq-and-carlyle/]
[4] Santos Extends ADNOC Exclusivity Despite Major Regulatory Hurdles [https://energynews.pro/en/santos-extends-adnoc-exclusivity-despite-major-regulatory-hurdles/]
[5] ADNOC Consortium Bids $30B for Santos Takeover [https://discoveryalert.com.au/news/adnoc-takeover-bid-santos-2025/]
[6] Playing the Conditions [https://www.wilsonsadvisory.com.au/news/playing-the-conditions]
[7] Abu Dhabi's Adnoc extends due diligence on Santos bid [https://www.argusmedia.com/en/news-and-insights/latest-market-news/2719687-abu-dhabi-s-adnoc-extends-due-diligence-on-santos-bid]
[8] Santos Shares Soar Over 15% Following Takeover Bid Valued at $18.7 Billion [https://www.procapitas.com/news/economy/santos-shares-soar-over-15-following-takeover-bid-valued-at-187-billion]
[9] Reactions, ramifications and responses to Santos takeover deal [https://www.energynewsbulletin.net/operations/news-analysis/4415395/blog-day-reactions-ramifications-responses-santos-takeover-deal]
[10] Australia's Santos, UAE's XRG delay takeover deal [https://www.argusmedia.com/en/news-and-insights/latest-market-news/2722498-australia-s-santos-uae-s-xrg-delay-takeover-deal]
[11] Global M&A trends in energy, utilities and resources [https://www.pwc.com/gx/en/services/deals/trends/energy-utilities-resources.html]
[12] Mergers & Acquisition Decisions in the Energy Sector [https://www.tandfonline.com/doi/full/10.1080/00128775.2023.2225484]
[13] ADNOC will have to offer more than money for Santos deal to work [https://www.reuters.com/markets/commodities/adnoc-will-have-offer-more-than-money-santos-deal-work-2025-09-05/]
[14] ADNOC's $18.7 Billion Bid For Santos Faces Big Hurdles [https://finimize.com/content/adnocs-187-billion-bid-for-santos-faces-big-hurdles]
[15] 2025 Oil and Gas Industry Outlook [https://www.deloitte.com/us/en/insights/industry/oil-and-gas/oil-and-gas-industry-outlook.html]
[16] Abu Dhabi's takeover bid for Santos raises Australian national interest concerns [https://ieefa.org/resources/abu-dhabis-takeover-bid-santos-raises-australian-national-interest-concerns]