Some have been encouraged by a failed $9.5 billion takeover of Santos, but the SA Government is not impressed.

Oil and gas producer Santos says it has rejected a nearly $9.5 billion takeover bid from US investment firm Harbour Energy.

“The board rejected the approach on the basis that the indicative price was inadequate and the source of funds were uncertain,” Santos said in a statement to the Australian stock exchange.

Harbour Energy is run by Washington-based EIG Global Energy Partners, which concludes former energy company executives from Santos and Shell.

The company recently bought oil and gas fields from Shell in the UK’s North Sea $US3 billion.

Santos says it is not in discussions with Harbour Energy about a new deal, and it has received any other takeover offers.

But analysts including RBC's Ben Wilson said it is a good sign nonetheless.

“We think confirmed reports of a previous indicative bid for Santos from Harbour Energy and a possible higher future bid offer further evidence of rapidly improving sentiment towards the back end of the oil curve and to a recovering LNG market driven by strong Chinese demand,” he told reporters.

“It also highlights Santos' strategic assets in the form of underutilised assets in the Cooper Basin and within GLNG.”

But SA Treasurer Tom Koutsantonis says Harbour is a corporate raider looking to break down Santos and sell its assets.

“This company shows me and gives me no confidence that it's here to operate, that it's here to be headquartered in South Australia, that it's here to grow,” Mr Koutsantonis said.

“They look like a company that's coming in to try and raid a company that has a relatively low share price in comparison to its assets.


“Do we really want to sell our largest gas producer to foreign interests?

“These foreign interests are the ones that will be selling their costs, their gas to our generators which could push up electricity prices and quite frankly I'm not very keen on that.”

The SA Government used to have a 15 per cent shareholding cap on Santos, but lifted it in 2007 in exchange for a promise that Santos would maintain a strong presence in South Australia.

Mr Koutsantonis is not ruling out reinstating the cap.

“We can reverse it. But we're not contemplating any of that,” he said.

“What I'm saying to Harbour is we don't believe that their intentions are noble. We think their intentions are purely driven by self-interest and greed.”