Two Chinese firms increase stake in Santos
Friday, May 12, 2017
Australia’s Santos said last week that two Chinese firms had increased their combined stake in the company and together now hold a 15.1 % share.

The disclosure comes as shares in Santos, Australia’s second largest independent gas producer, dropped last week to a six-month low as the federal government unveiled export restrictions on Australian LNG exporters to prevent domestic shortages.

The government is also putting pressure on Santos to increase gas supply to the domestic market from its Gladstone LNG (GLNG) project. Much of Australia has suffered a series of power outages and rising electricity and gas prices over the past 12 months owing to the gas shortage.

Santos is a partner in the 3.7 million tpy Darwin LNG project, which came on stream in 2005, and the 7.8 million tpy GLNG project, which opened in September 2015. 

Private equity firm Hony Capital, whose backers include state-sponsored Legend Holdings and Singapore’s Temasek, bought 2.3% of Santos’s shares last week.

Hony has been working with Chinese gas distributor ENN Ecological Holdings since 2015 to build up a stake in Santos.

On May 1, Hony and ENN revealed they were working together after signing a formal “acting in concert” agreement.

ENN became a top Santos shareholder in March 2016 when it bought an 11.7% stake, which had previously been held by Hony Capital.

Hony also bought extra shares of its own in late 2016. A report in the Australian Financial Review said earlier this month that there had been speculation from time to time about whether the Chinese firms might eventually seek more control of Santos.

Santos had already been suffering financial fallout amid the drop in oil prices over the past three years and heavy funding commitments for its US$18.5 billion GLNG project.

Other problems to plague GLNG have been technical issues as well as having to find alternative gas for the massive project.

Last year, Santos chief executive Kevin Gallagher revealed that the proportion of third-party gas had increased, as some wells had disappointed in the southern part of the company’s Roma field.

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