Upturn in Africa’s oil, gas deals market expected this year

As oil and gas companies continue to focus on portfolio optimisation by further investing in assets that are generating strong returns and selling assets that have lower returns, merger and acquisi¬tion (M&A) activity in the African oil and gas sector is expected to remain robust this year.

In 2013, Africa recorded about 17 percent of the global major deals amounting more than $12 billion done in the continent. It followed North America which had about 38 percent of the activities and the Former Soviet Union which cruised with 28 percent of oil and gas deals done in the globe to¬wards the end of third quarter of 2013.

While deal value fell in all regions worldwide in the first half of 2013, it increased in Africa by 66 percent from

$6.4 billion in H2 2012 to $10.6bn in H1 2013, according to PwC’s Oil and Gas global deals H1 2013. The increased deal value was driven by China Na¬tional Petroleum Corporation’s acquisi¬tion of 28.57 percent in Eni East Africa from Eni for $4.2bn and ONGC Videsh Limited’s acquisition of a 10 percent participating interest in the Ravuma Area 1 offshore Block in Mozambique from Videocon Industries Limited.

With major new discoveries of oil and gas in African countries such as Guinea, Kenya, Mozambique, Niger, Tanzania and Uganda, M&A deals in the continent will pick up steam as more investors are attracted to the continent’s resources.

In Nigeria, there has been a rise in the number of oil companies divesting from their onshore and shallow water fields in the prolific Niger Delta area, coupled with the impending marginal field bid round. Assets are now being divested by Shell and Chevron in Nigeria, and the likely selling of its assets in Libya by Marathon. “This divestment has been the prominent driver of M&A in Nigeria’s upstream sector which was largely inac¬tive until the sale of the Shell Petroleum Development Company’s (SPDC) eight assets for a combined total of $2.6bn between 2010 and 2012,” says CBO Capital in its oil and gas monitor. The completion of the ConocoPhil¬lips deal before the end of this year will raise the total completed deal size of over $6.7 billion between 2010 and 2103 to more than $8.5bn over three years. There are about 13 transactions in the pipeline, whose completion could create between $4bn and $8bn in value. In South Africa, where shale ex¬ploration was recently given the green light, a significant amount of shale related deals activity is expected in the country. From Africa to North America and in the Former Soviet Union, M&A activities will surge by more than 8 percent this year. China, Russia and the India will continue to be the big pocket buyers.More deals and presence of these countries will be noticed in Nigeria, Chad, Niger, Sao Tome & Principe, Senegal, Libya, Algeria, Tanzania, Iraq Kurdistan area, Kazakhstan. This will lead to increase in foreign direct investment in Africa and the countries mentioned will catapult their various national GDP

The presence of China, Russia and India will also be prominent in East Africa. The increase in number of M & A activities experienced since the end of Q2 2013 was adduced to the promising price of oil which averagely did not fall below $100 per barrel.