CAMERON MILNER: Jim Chalmers under pressure to reject ADNOC’s $30 billion Santos takeover bid

Treasurer Jim Chalmers knows that in Australia’s national interest, the Abu Dhabi National Oil Company takeover of Santos must be rejected.

In addition to our nation’s energy security and our broader national interest, there are specific concerns relating to ADNOC in relation to its record on climate action and its corporate track record that justifies rejection.

Mr Chalmers is still ambitious to be PM and knows handing the largest supplier of Australian east coast gas in Australia to a Middle Eastern tribal autocracy won’t help that cause.

Treasury will be able to brief Mr Chalmers about what ADNOC has done with its recent conquest, the German-based gas company, Covestro.

Since getting regulatory approval for the takeover, Covestro has shed 10 per cent of its workforce and announced a further $800 million of costs it wants to cut over the next three years.

The German trade unions are currently locked in tense negotiations over the next collective bargaining agreement that’s yet to be agreed.

ADNOC also has a stated company policy of employment “nationalism”, whereby the company’s mission is to employ as many Emiratis as possible across its operations.

Track records matter when it comes to making all the promises prior to acquisition and then doing something very different afterwards.

Mr Chalmers’ union power base is the Australian Workers Union, which has already raised serious concerns about the protection of pay and conditions as well as jobs in any potential takeover.

These are all considerations for Mr Chalmers, who alone, on the recommendation of the Foreign Investment Review Board, gets to decide.

It’s why his decision is allowed to be firmly in his own self-interest, even as he defends the national interest.

Of national interest for every industrial and domestic user of gas is that Santos is the largest supplier of gas to the eastern seaboard of Australia, including supplying South Australia directly and also Tasmania.

Gas is a key fuel for our energy transition as a nation, but its increased cost has brought pain to consumers and businesses alike. Do Australians really want to rely on a UAE-owned entity to decide our future gas supply and investment time frames for expansion?

Every Australian gas user has a stake in the outcome of this proposed foreign takeover.

Mr Chalmers knows every price increase for consumers will be sheeted back to him if ADNOC gets to control Santos.

Our standing as a nation, built on strong climate action and being a proud promoter of both LGBTIQA+ and First Nations peoples’ rights, is also being tested by this transaction.

On climate, ADNOC was mired in global controversy when its oil and gas CEO, Sultan Al Jaber, was also appointed as the UAE’s chair for COP28, the global climate change forum updating the world’s progress towards meeting Paris targets and cutting emissions.

Why the controversy? Well, ADNOC proudly wants to increase emissions between now and 2030, while companies such as Australia’s Woodside and Santos are cutting their emissions in the same time period.

ADNOC has lots of greenwashing on its website, but according to independent experts, ADNOC alone will produce more emissions than the entire United Kingdom and dwarfs Australia’s global emissions many, many times over.

The company is said by some environmental groups to have under-reported its global emissions by 14 times.

Australia is a climate leader and in the race to host COP 31 next year, ironically with Adelaide as the host city, the hometown of Santos.

Imagine the timing of Adelaide’s largest oil and gas company being owned by a global emitter, which is increasing global emissions to 2030 as nations announce Paris commitments of over 43 per cent cuts.

ADNOC does have a Diversity, Equity and Inclusion policy on its website and is genuinely trying to increase the number of women employed.

However, it’s absolutely silent on people with disability, or who are First Nations or members of the LGBTIQA+ community.

Santos, by contrast, proudly promotes its inclusion of all. So, the challenge for Mr Chalmers is reconciling the parent company’s complete silence with the loud and proud Australian company’s track record.

Lastly, First Nations Australians and indigenous groups in PNG, where Santos has significant operations, have raised legitimate concerns about ADNOC’s ability to respect and work with them. Santos has a track record; ADNOC appears to have none.

Perhaps the last guidance for Mr Chalmers should come from the long-suffering shareholders of Santos.

Santos’s current executive, Kevin Gallagher, and the board have done for gas producers what the Hindenburg’s management team did for hydrogen-powered flight.

The company has failed to get the Narrabri gas field up for more than 15 years and consistently trades at a discount to its net asset backing, a sure sign shareholders have concerns.

So it’s little wonder Santos management decided to throw the switch to vaudeville and promote a takeover bid as if this was their plan all along to give shareholders some value.

Gallagher has presided over significant erosion of share value, but has nearly $50 million in personal reasons to back a deal despite his own management failure to drive shareholder value. Similarly, the board is recommending the foreign takeover rather than take responsibility for where the company has found itself.

Tellingly, it would appear shareholders don’t believe the takeover will proceed as the implied value of the current bid is $8.89, but the shares are trading at a huge discount to that at $7.69. Shareholders who believed in the bid wouldn’t be selling at a discount.

Unlike Santos, which is stock market-listed and heavily regulated by Australian laws, ADNOC is a tribally-owned entity in the United Arab Emirates.

ADNOC is bidding a big number, $30 billion.

What Mr Chalmers will decide upon, though, is Australia’s own national interest, our energy security, our global leadership on climate, along with LGBTIQA+ and First Nations rights that are never for sale at any price.

The deal might be a life raft for an under-performing Santos executive and board, but it’s too high a price not to be formally rejected by Mr Chalmers, especially as he continues to work out how to be Australia’s next PM.

Cameron Milner is a former Queensland Labor State secretary