Saudi Aramco and ADNOC interested in Santos (ASX:STO)

Saudi Aramco and Abu Dhabi National Oil Co (ADNOC) have been separately studying potential acquisitions of Australia’s Santos, people familiar with the matter said, as the two Middle Eastern energy giants seek to increase overseas natural gas investments.

State-owned Aramco and Abu Dhabi National Oil Co have been conducting preliminary reviews of Santos as a potential takeover target, the people said, asking not to be identified because the information is private. Santos shares have risen about 1 percent this year, giving the company a market value of $24.9 billion.

Santos has liquefied natural gas projects in Australia, Papua New Guinea and East Timor, which are favored for their proximity to fast-growing demand in Asia. It also has a natural gas business focused on Australia’s domestic market and conventional oil assets in Alaska.

Santos has received several takeover offers in recent years. In 2018, Santos rejected several takeover offers from Harbour Energy of the United States. Woodside once held Preliminary talks Last year’s acquisition of Santos would have created a liquefied natural gas giant. anchor Earlier this year, Santos said in February it would look for other ways to unlock shareholder value.

Gulf states are investing billions of dollars in natural gas, which is seen as a key transition fuel in the energy transition. Qatar plans to nearly double its liquefied natural gas export capacity, while Saudi Arabia and the United Arab Emirates are pouring money into domestic oil fields and building trading operations around the world.

In June, Saudi Aramco reached a preliminary agreement to acquire a stake in Sempra’s LNG export facility in Texas, a deal that includes fuel transportation from the project. In the same month, Saudi Aramco signed its first LNG purchase agreement with the United States, signing a 20-year non-binding contract to purchase 1.2 million tons of LNG per year from NextDecade’s planned project in Texas.

ADNOC has been on a string of acquisitions that have made it one of the most active dealmakers in the energy sector. Last month, the company entered detailed talks to buy German chemicals maker Covestro for a price that could reach 11.7 billion euros ($18.8 billion). In May, ADNOC acquired stakes in natural gas projects in the United States and Mozambique, and has ambitions to expand its chemicals and trading businesses around the world.

Adelaide-based Santos could also attract interest from other potential buyers, the people said. Negotiations are ongoing and bidders have not yet decided whether to proceed with any proposals, the people said.