Operator of the Pilliga gas project, Santos, has confirmed the company is in discussions with major energy company Woodside ‘regarding a potential merger.’

The possible merger, described as a ‘mega-merger’ – was flagged by Santos at its ínvestor day’ at the end of November.

A full merger ‘would mean production of about 285 million barrels of oil and gas, making the combined group easily one of the largest 10 exploration and production companies worldwide’, according to the Australian Financial Review.

Santos and Woodside have emphasised that the talks are in the preliminary stages, and ‘there is no certainty any transaction will eventuate from the discussions.

“The consideration of any merger is at an early stage and there is no agreement between the parties,” Santos said in a statement.

Woodside and Santos have issued virtually identical statements about preliminary merger discussions.

However, if a merger of the two major Australian players in the oil and gas industries went ahead it could create an $80 billion-plus business.

A deal between the two companies would create án energy powerhouse’ a commentator observed.

There is plenty of speculation about possible outcomes.

One analyst observed that if there was a Woodside-Santos merger it would indeed be ‘big news.’

“Woodside is a $59.8 billion oil giant – merging with the $22.7 billion Santos has the potential to create an $82.5 billion energy behemoth.

“That would make the combined company larger than both ANZ Group Holdings and Westpac Banking Corp.”

The future of the Pilliga gas project will be viewed with keen interest locally.

Some commentators speculate whether Woodside would be interested in all of Santos’ assets.

In November 2011, Santos acquired Narrabri-based Eastern Star Gas and the company’s operations in and around the Pilliga.

The gas project has been subjected to rigorous scrutiny and conditions and been challenged by environmental activists but granted approvals, with state and federal government support, in the journey towards production.

The Pilliga gas project could supply up to half of NSW’s natural gas needs, according to Santos.

In a statement to the Australian Stock Exchange, Santos managing director and chief executive officer Kevin Gallagher said the company would continue to update the market.

“Santos continuously reviews opportunities to create and deliver value for shareholders.

“Santos is assessing a range of alternative structural options with a view to unlocking value as referred to on Santos’ investor day on November 22.” .

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