Santos bid still falls short

THE late, not so great, entrepreneur Alan Bond basically kicked off the infamous 1980s ‘decade of greed’, both for himself personally and more broadly when he opportunistically (and cleverly) bought 45 per cent of Santos from a foreign oil company.

Even though by then he was well and truly an Aussie – albeit with a cockney accent – the South Australian state government passed a special one-off law, forcing him to cut his stake below 15 per cent.

Perhaps he moved too early – it was before he became, at least temporarily, a national hero by winning the America’s Cup.

Fast forward more than four decades and we have an opportunistic foreign oil company wanting to do the reverse: buy a much bigger and far more important (to our energy future) Santos; and no government is going to stand in its way.

Certainly not the federal government and not the newly elected state Liberal government either.

Nor for that matter, would the late, and also not so great, Weather-dill state Labor government have done so either.

Should they? No.

The best way to ensure future oil and gas supply to not just SA but Australia overall is via national energy policies.

More specifically, putting any sort of company-specific legislative or regulatory bear-hug around Santos wouldn’t only not work – Santos cannot guarantee SA’s energy future – but would actually be counter-productive.

We can see all this play out so disastrously in the various – and depressingly bipartisan – state bans on fracking (for both oil and gas) and indeed against oldfashioned conventional oil and gas exploration and development.

Have we lost all touch with reality? The answer is a resounding yes when you have state governments banning the discovery and development of oil and gas – and then complaining about shortages and high prices!

As I argued when Harbour surfaced two months ago with a potential bid for Santos, it was precisely the sort of foreign investor we should want; and specifically so in oil and gas. It was aimed at being a serious, valuecreating long-term oil and gas investor and business.

It would provide an impressive and meaningful alternative to ‘big gas’– those existing players that dominate our gas industry and have created huge (and expensive to consumers) problems of domestic supply.

Unlike the Shell bid to buy our biggest standalone oil and gas company Woodside in the early 2000s – which was banned by then treasurer Peter Costello – there would be no risk of Harbour ‘cellaring’ Santos’s oil and gas. After spending perhaps $15 billion to buy Santos, Harbour will want to maximise and grow output.

The question then will be left to the board of Santos and shareholders. It becomes a question of price and terms.

Harbour has increased its offer from April’s opening $US4.98 ($6.50) a Santos share to $US5.21 ($6.95). But with three very significant changes.

It has dropped the idea of giving accepting shareholders a guaranteed Australian dollar price for some of their holdings.

It also dropped the offer to reinvest in the unlisted vehicle buying Santos.

It is an offer Santos should find impossible to accept.

If Harbour sincerely wants Santos , it has to offer a compelling price – it has to be more than $US5.21.