Resources Minister Madeleine King says goverment will act in national interest on Santos deal

Resources Minister Madeleine King says the Albanese government will act in national interest on the $30bn Santos takeover, as world oil markets adjust to the realities of war time.

Smoke rises from an oil storage facility after it appeared to have been struck by an Israeli strike on Saturday in Tehran. Picture: AP

Tehran may opt to attack energy infrastructure through the Middle East rather than attempt a full blockade of the Strait of Hormuz shipping channel, limiting any oil price pain to a brief but potentially extreme chapter of energy market history.

Analysts are confident that oil benchmarks are destined for price gymnastics as commodity markets adjust to war time and forecasts of $US150 ($234) a barrel crude vie with the more sober reality of world markets on Monday, when oil eked out only modest gains.

The conflict introduces another dynamic for investors in Santos, the ASX-listed oil and gas giant under a $30bn takeover offer from Abu Dhabi’s ADNOC and private equity firm Carlyle.

Federal resources minister Madeleine King said Labor was focused on the national interest in evaluating the future of Santos as a foreign-owned company, should the offer be formalised.

“There is a process to be followed in relation to the proposed sale of Santos to ADNOC,” Ms King told The Australian.

“I am aware there is a lot of speculation about the conditions that might be attached. The Albanese government will always act in the national interest.”

Madeleine King. Picture: Pema Tamang Pakhrin

ADNOC subsidiary XRG’s consortium was granted due diligence by the Santos board with its third offer of $8.89 a share, but insists the spike in crude would not lead to any altered bid terms.

Investors may decide otherwise as they weigh up oil market volatility against the uncertainty over the Middle East consortium clearing regulatory hurdles including Australia’s Foreign Investment Review Board.

While Brent crude surged 6 per cent to $US81.40 a barrel in early trade on Monday, prices later receded below $US78 a barrel with the lack of disruption to physical supply easing fears over geopolitical unrest.

Although Iran’s parliament voted to close the Strait of Hormuz, experts said that retaliatory tactic following bombing may prove difficult given the position of the US Navy’s Fifth Fleet in Bahrain.

Forecasting any disruption should Iran target Hormuz would cue anxiety in energy markets, according to analysts.

Analysts say any disruption by Iran in the Strait of Hormuz would cue anxiety in energy markets. Picture: AFP

“If a blockade were to occur, I would expect oil prices to spike into triple digits—possibly reaching $US120 or even $US150 per barrel—but only briefly,” said Muyu Xu, analyst with Kpler. “This is because the US is expected to intervene, and countries with strategic interests in the region would apply collective pressure, making it difficult for Iran to sustain such a move for long.”

Goldman Sachs predicted Brent crude could jump to $US110 a barrel following a sustained fall in oil flows through the Strait while gas in Europe could return to levels that triggered demand destruction during the 2022 Ukraine crisis.

Instead, Iran may strike individual tankers and key ports with missiles and mines, testing the “energy tripwire” of US President Donald Trump, according to RBC Capital Markets.

“We do not believe it is a ‘full closure or nothing’ scenario when it comes to the waterway, and Iran may deploy their asymmetric capabilities to raise the economic cost of the combined US/Israeli operations,” RBC analyst Helima Croft said.

“While the events in the Middle East remain fluid, we think that the economic incentives, including for the US and China, to try to prevent a sustained and very large disruption of the Strait of Hormuz would be strong,” Goldman said in a research note.

The Strait of Hormuz has never been closed, despite Iran’s threats to do so when sanctions were imposed in 2011.

“Selective disruptions that scare off oil tankers make more sense than closing the Strait of Hormuz given Iran’s oil exports would be shut down too,” CBA analyst Vivek Dhar added.

Two supertankers scheduled to load crude from the Gulf later this week made U-turns when approaching the Strait on Sunday and are now in wait mode, according to Kpler, suggesting that shipowners are taking precautionary measures.

Shipping giant Maersk said it was monitoring the situation closely.

“At the moment sailing through the Straight of Hormuz continues, but we are ready to re-evaluate this based on information available. Equally, we will continuously monitor the security risk to our specific vessels in the region and are ready to take operational actions as needed.”

An Iranian response may take days or weeks to play out in the region.