O&G sector to spend up to RM30b in M&A

PETALING JAYA: Malaysia's oil and gas sector is expected to spend between RM26 billion and RM30 billion in merger and acquisition (M&A) and capital projects this year, said Deloitte O&G leaders.
Based on market projections by Deloitte O&G leaders, some RM22 billion is estimated to be spent in capital projects and RM8 billion in M&A.
Deloitte Southeast Asia M&A tax, energy and resources leader, Steven Yap said 2014 will be an interesting and critical year for many O&G players as they seek growth in a challenging environment with continuing pressure to improve productivity from substantial investments in major capital projects that are yet to come on stream.
"Containing costs and applying improved technologies are two foremost issues in the minds of many O&G players. They collectively form the over-arching theme influencing many companies, voluntarily or otherwise to rationalise and consolidate to achieve economic sense now for the future," Yap said in a statement yesterday.
He said Southeast Asia is undergoing developments, acquisitions developments, acquisition and divestitures to deal with greater demand for energy.
With Malaysia stepping up to the next level of the value chain as an O&G hub in Southeast Asia, Yap said it would not be surprising to see many companies being compelled to reorganise to the right size through M&A especially to scale up and build capacity to be able to effectively deliver their services from exploration and production to major capital projects.
Deloitte Malaysia energy and resources leader and corporate finance executive director, Nizar Najib highlighted that Malaysia's O&G sector is poised for massive growth in the next few years, with Petroliam Nasional Bhd's planned capital expenditure spend of RM300 billion between 2011 and 2016 as well as investments in key areas such as enhanced oil recovery (EOR), marginal fields and deepwater exploration.
"In the near term, we expect to see an increase in oil production due to various initiatives such EOR, marginal fields and deepwater exploration," he said.
Meanwhile, he said long-term upsides can be expected from gas and therefore Malaysia is positioning itself to be a regional hub for liquefied natural gas and petrochemicals through projects such as Refinery and Petrochemical Integrated Development, floating liquefied natural gas and overseas acquisition in Canada.
"There are no more low hanging fruits. Future exploration will be technically more challenging and riskier," Nizar added.