Southeast Asia will be a hotbed for upstream mergers and acquisitions (M&A) in the next two years, with more than $5 billion of assets up for grabs, research from Rystad Energy, an independent energy research and business intelligence company headquartered in Oslo, Norway, showed.
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The bulk of these opportunities are in Indonesia, where assets worth over $2 billion are on the market, followed by Malaysia and Vietnam which have approximately $1.4 billion and $1 billion for sale respectively. About $700 million of deals have already been completed in the region so far in 2023, the strongest start to Southeast Asia’s upstream M&A activity since 2019.
Of all the assets up for sale, 74 per cent are in the pre-final investment decision (FID) stage, 21 per cent already in production, and the remaining 5 per cent or so already under development. Combined, they represent some 4 million barrels of oil equivalent (boe) in resources and around 270,000 boe of daily production with a gas-to-liquids ratio of 63:37, a lucrative proposition for prospective investors.
Prateek Pandey, Vice President of Upstream Research, Rystad Energy, said, “The sheer magnitude of the oil and gas deals in the region will reignite the sector, reducing reliance on national oil companies (NOCs) and major players that have developed in recent decades. Southeast Asia presents an excellent opportunity for upstream players looking to strengthen their hydrocarbon portfolios.”
Regulators encouraging M&A
According to Pandey, fiscal and regulatory frameworks was playing a significant role in encouraging M&A activity, helping to attract buyers and secure deals. The administrative updates that Malaysia, Indonesia, and Thailand have implemented in recent years are boosting interest from energy majors and other new regional buyers as these countries benefit from successful exploration results.
“Other countries in the region – such as Vietnam and Cambodia – are looking with envy at their neighbours and trying to enact similar processes to attract investments and deals. As a result of this fiscal loosening, a host of diverse oil and gas players are looking seriously at Southeast Asia as a pillar of their portfolio expansion plans,” he said.
The M&A opportunities expected to change hands are spread across the entire lifecycle, including producing, under development and newly discovered resources. Malaysia leads the pack in terms of producing assets on offer with a 45 per cent share of the regional total, with Indonesia the next largest at 27 per cent.
Discovered but not yet under development resources dominate the opportunities though, with almost 3 billion barrels of oil equivalent (boe) up for sale. Indonesia leads this category by quite some margin, boasting 1.6 billion boe of available resources, followed by Vietnam with 780 million boe and Malaysia with 460 million boe. Myanmar and Thailand also have discovered resources available for purchase, but these are greatly overshadowed, the research said.
In terms of the total oil and gas resources on offer, Indonesia leads with a 50 per cent share, followed by Malaysia with 24 per cent and Vietnam with around 20 per cent. Given the significant size of resources on offer from Indonesia, it is also the leading country in terms of the total deal value of resources on offer at around $2 billion, followed by Malaysia at around $1.4 billion.
Based on recent upstream transactions in Southeast Asia, the average production metric stands at between $17,000 and $20,000 of daily production and between $2 and $3 per boe of resources, the research said.