A breakthrough in merger negotiations between Santos and Oil Search has paved the way for the creation of a $21 billion Asian player better able to weather the harshening climate for oil and gas producers in the push towards net zero emissions.

The big step towards a deal, in the form of improved all-scrip merger terms offered by Santos, came two weeks after the Adelaide-based producer’s original offer was unveiled, which Oil Search had refused to engage on saying it undervalued its assets in PNG and Alaska.