$32 billion of oil and gas assets set to change ownership

05 September 2019 Consultancy.com.au 3 min. read

Substantial divestments of assets by international oil companies Eni and ConocoPhillips are expected to drive a shake up of as much as $32 billion across Australia’s oil & gas sector in the near future, according to new analysis from energy consultancy Wood Mackenzie. 

According to the firm, merger & acquisition (M&A) activity is likely to skyrocket in Australia’s oil sector, as international oil companies begin to rationalise and divest their assets in the country. Smaller oil companies, meanwhile, are looking to consolidate their assets, while significant changes in the natural gas segment is likely to drive further transformation.

A recent report by Adelaide-based consulting firm EnergyQuest revealed that Australia is likely to become the world’s top exporter of liquefied natural gas (LNG) by as early as 2020. The country currently lies in second place behind Qatar, but LNG production in Australia is likely to reach 80 million tonnes by 2020, which will take it past Qatar’s output.

$32 billion of oil and gas assets set to change ownership

M&A activity in the L&G sector is likely to consist of ownership reshuffles to support this growth.“A change in ownership of the downstream facilities could breathe new life into several stalled upstream projects,” explains Wood Mackenzie in its report.

The oil sector, meanwhile, does not have such a promising cause for its reshuffle. Significant depletion of reserves in the Bayu-Undan oil field have reportedly driven ConocoPhillips – a US-based oil company that operates the field – to consider offloading its shares and invest its capital back in the US market. 

Italian company Eni is also a shareholder in the Bayu-Undan field, and is likely to divest its stake to seek opportunities in other markets. “The undeveloped gas assets, Evans Shoal and Blacktip, offer limited potential when Bayu-Undan ceases in 2022, and the Italian player may prefer to focus on more attractive opportunities in the Middle East and Mozambique,” says the report.

When it comes to smaller companies, Wood Mackenzie expects Cooper Energy, Senex Energy, Comet Ridge and Galilee Energy to be involved in significant M&A activity over the next few years, as they look to consolidate their position in the market. However, these companies are likely to differ in their popularity.

Cooper Energy, for instance, is likely to draw four times the value that the other firms will, given that it has a reserve of discovered gas that is ready to be drilled into. Overall, M&A activity in the sector is likely to jump, a trend which is consistent with the merger & acquisition market in other sectors across Australia. A recent report from EY for instance highlighted the booming M&A scene in the mining & metals sector.