Woodside Energy and Santos are in talks on a potential merger of their businesses in a surprise move that reflects a global trend of consolidation among oil and gas producers amid pressures to decarbonise and mounting hurdles on growth projects.

The combination of the country’s two biggest listed oil and gas producers would create a company with a market value of almost $80 billion and bring together assets that two years ago were split across four companies, including Oil Search and BHP Petroleum.