A80 bln tieup would create dominant Australian player
Domestic asset sales likely needed for antitrust approval
Santos investors doubt Woodside will pay big premium

SYDNEY, Dec 8 Reuters Santos Ltd shares jumped on Friday on the prospect of a possible 52 billion merger with bigger Australian rival Woodside, but investors said valuation will be key, while domestic asset sales are likely to be needed to overcome competition concerns.

After market hours on Thursday, Woodside and Santos confirmed speculation they were in preliminary talks to create a major oil and gas company, which together would have assets in Australia as well as Alaska, the Gulf of Mexico, Papua New Guinea, Senegal and Trinidad and Tobago.

The discussions are being driven by the need for the Australian companies to gain scale to fund the energy transition, analysts said.

The merged group would create a major global liquefied natural gas LNG producer that could attract more offshore investors as gas is seen as a key bridging fuel in the shift to cleaner energy.

Bigger global rivals Exxon Mobil and Chevron have also boosted their oil and gas reserves in multibilliondollar deals this year.

Santos shares jumped nearly 11 in early trade to hit their highest level in five weeks, but pared gains to settle up 6.2. Woodside trimmed early losses and closed down 0.5.

The merger discussions put Santos, the smaller of the two companies, firmly in play, said Macquarie analyst Mark Wiseman.

We expect this…