Woodside Energy (WDS.AX) and Santos (STO.AX), both of which are based in Australia, said on Thursday that they were in exploratory discussions to establish a global oil and gas behemoth with a value of A$80 billion ($52 billion). This comes at a time when the consolidation of international energy companies is becoming more intense.

The combination of two of Australia’s top oil and gas producers would be the largest corporate deal in the country for several years. During this time period, buyout activity has been slowed down owing to rising interest rates and instability in the financial market.

Both businesses are confronted with increasing demands related to decarbonization and difficulties with regard to their ongoing initiatives.

Woodside, which is located in Perth and is the larger of the two, stated that the discussions with Santos were secret and could not be completed, and that there was no assurance that a deal would be reached.

“Woodside continuously assesses a range of opportunities to create and deliver value for shareholders,” the company stated in a statement sent to the Australian stock market.

Compared to Santos, valued at A$22.1 billion, its market capitalization is now recorded at A$56.91 billion. A combination of the two would be subject to strict inspection by Australia’s Competition Commission, which has been taking a more stringent position in approving takeovers in concentrated industries.

To quote an Australian Competition and Consumer Commission representative, “The ACCC is aware of public reports of the potential transaction,” the statement said. “If the potential transaction progresses, the ACCC would consider if a public merger review into the impact on competition is required.”

“It makes sense given how the share prices have languished and all the capex that is to come,” said Jun Bei Liu, the portfolio manager for Tribeca Alpha Fund, which holds shares in both Santos and Woodside.

“In today’s world, oil is almost done, so you need to get scale and generate as much profit as possible to invest in the energy transition.” Recent international oil and gas transactions were the impetus for the proposed merger.

It was announced on October 11 that Exxon, the top oil producer in the United States, had agreed to acquire Pioneer Natural Resources (PXD.N.) in an all-stock transaction valued at $59.5 billion. This acquisition would make Exxon the leading producer in the largest oilfield in the United States and ensure a decade of low-cost production for the company.

To acquire a larger oil footprint in the United States and a share in the significant finds made by competitor Exxon Mobil (XOM.N) in Guyana, Chevron (CVX.N) has reached an agreement to acquire Hess (HES.N) for a total of $53 billion in stock. This transaction is the most recent in a string of successful oil mergers in the United States.

Woodside has just merged with BHP Group’s (BHP.AX) oil and gas company, while Santos has recently acquired Oil Search. Both of these mergers are examples of recent large-cap mergers in the Australian oil and gas industry, subject to existing efforts to simplify the industry.

“After the BHP acquisition, Woodside has already begun to look outward, and both companies have had good runs with the high oil and gas price environment of the past two years,” said Kaushal Ramesh, vice president of LNG Research at Rystad Energy. “Woodside has already been looking outward.”

Conversations on a merger with Santos took place fewer than 18 months after Woodside completed the BHP transaction and when the company struggled to obtain final clearances for its Scarborough partnership in Western Australia, its most significant growth project.

In September, L1 Capital, a local hedge fund and stakeholder in STO, requested the business investigate the possibility of breaking apart the firm’s LNG assets to assist in boosting its share price, which had been falling behind both global and local rivals for the past three years.

In their annual investor briefings, both Woodside and Santos highlighted the difficulties that they were experiencing with their near-term output, as well as the rising costs of capital expenditures and the regulatory obstacles related to existing projects.

Once it has completed a new round of negotiations with traditional landowners, Santos intends to move forward with the Barossa gas project and resume construction.

A significant cause that might be driving the proposed merger of the oil giants is the fact that companies are attempting to build value by utilizing improved funding alternatives and cost reductions amid falling share prices. Since the beginning of the year, Woodside’s share price has decreased by 15.4%, while the stock price of Santos has decreased by 4.3%.