Australian fossil fuel giants Oil Search and Santos are close to a merger that would create a new entrant into a $21 billion entity and the top 20 largest oil and gas companies globally.
The merger talks come as the resource industry undergoes a major overhaul amid growing pressure from the climate change movement.
Santos, Australia’s second largest independent gas producer, is offering Oil Search a six percent premium on its share price, with Oil Search shareholders holding a 38.5 percent stake in the merged entity, while Santos holds a 61.5 percent stake. will share.
Oil Search, which operates oil and gas production operations in Papua New Guinea, will recommend its shareholders to accept the offer.
Kevin Gallagher, CEO of Santos, said, “It represents a compelling combination of two industry leaders to create an unrivaled regional champion of size and scale with an unparalleled diversified portfolio of long-life, low-cost oil and gas assets. “
“The merged company will have strong cash generation from a diverse array of assets that provides a strong platform for sustainable growth and consistent shareholder returns,” he said in an investor announcement.
“The merger is also based on our industry-leading approach to environmental, social and governance (ESG) through a combination of Santos’ net-zero 2040 route.”
Rob Nichols, associate professor of regulation and governance at the University of New South Wales, called the merger “logical” and said climate change action would remain top of mind throughout the life of the new entity.
“For Santos, it’s another in a series of logical acquisitions; for Oil Search, it’s a good exit price,” he told The Epoch Times. “The fossil fuel sector is becoming increasingly difficult to bank. Institutional investors are unwilling to commit significant funding unless a planned move towards carbon neutrality is taken.”
Financial companies, including banks, insurers and retirement funds, are shifting their investments or services away from businesses considered major emitters.
The move has been taken in response to global trends and climate change activism in the boardroom.
The Insurance Council of Australia noted in a recent submission (PDF) to the Parliamentary Joint Standing Committee on Trade and Investment Growth that in 2006, 62 investment companies (controlling more than US$6.5 trillion in assets) signed the United Nations-backed Principles for Responsible Investment.
The pledge saw corporations take steps to incorporate ESG issues into their decision-making – including climate change action to reduce global emissions.
As of April 2018, the number of signed companies had grown to 1,715 companies (controlling US$81.7 trillion), including Australia’s “Big Four” insurers—Allianz, IAG, QBE and Suncorp—that account for 70 percent of the country’s insurance market. control the.
This has led to local mining industry players in Australia complaining of difficulties getting large projects off the ground. In contrast, global resources firm BHP has started looking for opportunities to sell its petroleum business.
The issue is currently the focus of an Australian parliamentary inquiry.
Regarding Santos and Oil Search, Nichols said only a few businesses can continue to operate free of the pressures of climate change.
“The merged entity will need to be able to demonstrate a path to carbon neutrality over time to continue to have access to capital markets,” he said. “The challenge is that although burning natural gas produces less CO2 per unit of energy generated than coal, it remains a fossil fuel without a renewable component.”
News From – The Epoch Times