PERTH (miningweekly.com) – Advisory firm Wood Mackenzie (Woodmac) has estimated that a potential $14-billion of upstream oil and gas assets could potentially be coming into the market, as the merger and acquisition (M&A) market in Asia begins to thaw.

Woodmac Asia Pacific vice chairperson Gavin Thompson noted that the recent increase in asset acquisitions saw North American deal flow hit its highest level since 2019, while across the rest of the world M&A activity was showing signs of a gradual, if uneven, recovery from the abyss of 2020.

“This isn’t a huge surprise, given the horrendous challenges companies faced last year as lockdowns and crashing oil prices paralysed the market. But with recovery in prices and demand, and success with ongoing vaccine rollouts, optimism is creeping back into the market,” Thompson said in a blog post.

He noted that Asia Pacific was playing a key part in this story.

“Following a miserable 2020, in recent weeks both Shell and Repsol have sold assets across Southeast Asia, clear evidence that there’s business to be done in the region. Woodmac’s upstream team now identify almost $14-billion worth of assets up for grabs across Asia Pacific, with almost the same again in the speculative bucket. The majors and large independents are the key sellers, as portfolio high grading and the energy transition continue to drive further non-core divestments as strategies adapt,” said Thompson.

The assets highlighted by Woodmac are either announced or strongly rumoured to be available for prospective buyers, including farm down opportunities. Of these, liquefied natural gas (LNG) projects account for more than half, with conventional shelf and onshore making up almost all other opportunities.

In terms of project status, pre-final investment decision (pre-FID) assets dominate, with less than a third of the $14-billion of assets up for sale currently onstream. 

“The majors dominate the selling pool. This includes ExxonMobil’s Malaysia portfolio and Ca Voi Xanh in Vietnam, Chevron looking to sell its stake in Indonesia’s Deepwater Development (IDD) and the North West Shelf in Australia and Shell putting its positions in mature, shallow water oil and gas fields in Sarawak up for sale.

“The Large Cap international oil companies are also active, with ConocoPhillips potentially looking to exit the Corridor PSC in Indonesia as it further streamlines its global portfolio and BHP looking to offload its position in the Bass Strait and Kipper fields.  Other sellers include PERTAMINA farming-down in the Rokan PSC in Indonesia and Santos looking to do the same at the pre-FID Dorado project in Australia. Meanwhile there have been recent smaller scale deals such as Jadestone entering Malaysia and Cue Energy/NZOG taking a position in Australia. Eni has now exited Pakistan.

“And it doesn’t end there. We categorise a further $13-billion of assets as potential farm-downs or speculative candidates for divestment as portfolio rationalisation, balance sheet rebuilding and decarbonisation encourage future divestments,” said Thompson.

However, Woodmac noted that two key challenges remained in the recovery of M&A activity, namely finding enough buyers and securing finance to close the level of opportunities coming to market.

However, Thompson said that there were reasons for optimism, with several serious buyers emerging, even if not all yet have access to enough capital.