Koutsantonis said the South Australian government would use powers, including those governing the licensing of gas extraction, to ensure that Woodside was brought to the negotiating table with the government, should it seek to “relocate” Santos resources out of the state in a merger.

While he wasn’t sure whether the merger bid was realistic, he believed the South Australian Government would have leverage in the case of it going ahead.

“I’m watching this; I am monitoring this,” he told reporters in Adelaide today.

“There are regulatory powers that we have. The South Australian government will not be a bystander here. If Woodside have ambitions to take over Santos, to merge with Santos and relocate any resources out of South Australia they’ll be having serious discussions with the South Australian government.

“We will be using every inch of the regulatory powers that we have, including licensing, to ensure they are brought to the table to speak to the South Australian government.”

The Minister would not go into detail about his threat, but he did reference his powers to grant licenses under the Petroleum and Geothermal Energy Act.

He said that while he couldn’t stop a merger, any transfer of licenses in South Australia would have to be approved by the Minister.

Santos is South Australia’s biggest company, with more than 3000 employees.

The company confirmed on Thursday night that “it has engaged in preliminary discussions with Woodside regarding a potential merger”.

“Santos continuously reviews opportunities to create and deliver value for shareholders,” a statement said.

“The consideration of any merger is at an early stage and there is no agreement between the parties. There is no certainty that any transaction will eventuate from these discussions.”

Koutsantonis said he wasn’t convinced the merger was realistic, but rather was an opportunistic approach to take advantage of Santos’s “undervalued” share price.