In a statement, Woodside confirmed the merger discussions with Santos, which it said “remain confidential and incomplete”.
The Perth-based firm added “there is no certainty that the discussions will lead to a transaction”.
Meanwhile, in a separate statement Santos also confirmed the “preliminary discussions” with Woodside.
“Santos continuously reviews opportunities to create and deliver value for shareholders,” the statement continued.
“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.”
Santos said it is assessing a “range of alternative structural options” for the company.
The talks follow a series of global mergers within the oil and gas sector this year, after two major deals in October which saw US supermajor Chevron agree to buy Hess Corp for $53bn and Exxon Mobil buy Pioneer Natural Resources for $59.5 billion.
Both Woodside and Santos have been engaged in ongoing court challenges this year centred on environmental challenges to major projects.
Woodside’s $11bn Scarborough gas project has been held up over concerns about seismic testing while Santos’s $4bn Barossa gas project has been met with a challenge over its impacts to Indigenous cultural heritage.
Pressures to decarbonise and simplify within the Australian oil and gas sector have already led to a number of consolidation deals involving the two firms in recent years.
Santos acquired Papua New Guinea-focused Oil Search in 2021, while last year Woodside completed a merger with the oil and gas arm of Australian mining giant BHP.