Australia's top oil and gas companies, Santos and Woodside, are in talks for an $80 billion merger.

Santos has confirmed the talks, while Woodside notes that any discussions are confidential and incomplete.

Investor pressure is reportedly driving Santos' interest, with a suggested 40 per cent value gain if its LNG business is separated. 

Woodside's discussions follow its merger with BHP 18 months ago, facing hurdles in the $16.5 billion Scarborough venture. 

Analysts see Santos' move positively, anticipating potential divestments.

Both companies share common challenges, and the talks have surprised some, questioning the benefits of an Australian-to-Australian deal. 

Investors point to the US oil and gas sector's ongoing consolidation trend, exemplified by recent multi-billion-dollar deals involving ExxonMobil, Chevron, and ConocoPhillips.