Investors target Libya, Iraq oil ventures



JEDDAH: ARAB NEWS

Published — Wednesday 19 December 2012

Last update 18 December 2012 11:30 pm

| نسخة PDF Print News | A A

Global oil and gas transactions have suffered a modest decline in both deal count and total value in the first half of 2012. However, increasing merger and acquisition (M&A) interest by MENA-based energy and petroleum (E&P) companies and investors has been witnessed, says a new report from Deloitte.
The MENA region has seen some significant developments and opportunities for upstream M&A in recent months, says the white paper entitled ‘Mergers and Acquisitions in the Oil and Gas Industry: Current Upstream M&A Issues and Transaction Considerations.’
It points out that foreign investors are eyeing opportunities regionally with the expectations for Libya, now poised to return to full-scale oil production in the near future and Iraqi oil production, which has now passed the 3 million barrels per day level.
“When we assess the current state of the oil and gas sector in the MENA region, the question remains as to whether these nations will achieve optimum production levels or whether they will continue to face constraints due to outdated infrastructure, political challenges, policy uncertainty and continued security threats,” said Kenneth McKellar, energy and resources leader, Deloitte Middle East.
“These are some of the issues that interested E&P companies are being faced with,” he added.
North African countries are also now seen to be returning to the ‘business as usual’ mode, with an increase in foreign investments. Legacy risks remain, however, off-take contracts with national oil companies continue to experience disruption during the transition period of governments with E&P companies in the region facing significant challenges to working capital management, the white paper highlights.
The Deloitte white paper also sheds light on the unconventional sources of hydrocarbons, such as US shale gas exploration, oil production from the bituminous sands in Canada and deep water production in Brazil’s pre-salt blocks that have provided new opportunities and a recent surge in interest from international oil companies (IOCs).
“While the uncertainty caused by the Arab Spring might be keeping certain investors out of these markets, there are other investors who are taking a longer term view on opportunities in MENA, particularly strategic investors who have the financial and operational resources, to acquire these assets at low prices,” said Adnan Fazli, oil and gas financial advisory leader, Deloitte Middle East.
The Deloitte white paper takes a closer look at the M&A issues that face investors looking to transact in the region, and how these are being managed through the screening, diligence and valuation phases of the transaction.
Here are some of the issues outlined in the Deloitte white paper:
Fiscal regime and pricing uncertainty: The fiscal terms being offered by governments have been on the top of the agenda for contractors with assets in countries affected by the Arab Spring and consequent regime change.
Operational challenges and valuing risk: Although it is unlikely that there will be any radical overhaul to the current systems in place, the transitional challenges around cash collection by the operators has led to financial distress for a number of operators, who are offering such assets for sale.
Capital and carry commitments and decommissioning liabilities: As investors look to enter new upstream geographies they need to give adequate consideration to asset retirement obligations that are being introduced into new agreements or renewals and their impact on the project economics, the government’s take and operator’s carry obligations.
Unconventional assets: The operational resources and effort required to develop unconventional assets are more complex and the costs significantly higher than development of conventional assets.
Tax considerations: The tax provisions applicable to oil and gas exploration and production companies vary significantly according to the specific terms included in their contract with the government as well as the type of the contract agreed.
While oil and gas prices rise and fall, a resurgent regional and global energy market driven by increased demand from many Asian economies and the MENA region, and the investment needs that accompany that resurgence, should set the stage for sustained M&A activity over the longer term, the Deloitte whitepaper highlights.

What's happening around Saudi Arabia

JEDDAH: A Mercedes car with a Saudi number plate was spotted in Israel. The discovery led to intense discussion on social media websites on Tuesday.According to reports, the car was spotted last week in Jaffa’s Clock Tower Square by Jacky Hugi, the M...
RIYADH: The Kingdom is experiencing extremely hot weather conditions.According to a report from the Presidency of Meteorology and Environment (PME), Central Province, Jeddah, Makkah and Madinah, experienced “extremely hot weather with surface winds a...
ALKHOBAR: Many Saudi citizens travel outside the Kingdom during vacations looking for entertainment for themselves and their families as entertainment facilities in the Kingdom do not meet their aspirations. They have called for setting up entertainm...
TAIF: Makkah Gov. Prince Khaled Al-Faisal inaugurated state-of-the-art Radf public park in Taif which has an interactive fountain — the biggest of its kind in the Kingdom and spread over 13,000 sq meters. The fountain has colored lighting and a displ...
JEDDAH: The Special Criminal Court has issued a preliminary order in a case related to a Saudi national who fought with militant organizations in Syria. The court, functioning at its summer headquarters in Jeddah, sentenced him to a seven-year jail t...
RI YADH: The Kingdom has decided to increase the financial aid to Palestine by raising its monthly aid to the Palestinian Authority’s budget from $14 million to $20 million. The substantial increase brings Saudi Arabia’s yearly aid for Palestine to $...
JEDDAH: The Saudi Ambassador to Jordan has rejected terror charges against Saudis incarcerated in Iraqi jails and slammed the government of that country for concealing information on the inmates."The file of Saudi prisoners in Iraq has grabbed the at...
JEDDAH: Six female members of the Shoura Council participated in a training program to raise awareness among citizens on the municipal elections in which women will participate. The program was organized by Al-Nahda Philanthropic Society for Women un...
RIYADH: Custodian of the Two Holy Mosques King Salman has issued an order appointing and promoting 96 members at the Bureau of Investigation and Public Prosecution (BIPP) at various ranks.Sheikh Mohammed bin Fahd Al Abdullah, BIPP president, expresse...
DAMMAM: After the recent increase in verbal and physical harassment of women and girls in the Kingdom, they have turned to martial arts in order to protect themselves. Amani Yassin, a coach at Taekwondo Training Institute, said: “Saudi women are inte...
RIYADH: A youth has been arrested for allegedly killing a Saudi man near the Madinah airport recently. The police apprehended the alleged killer without incident. The suspect, a 24-year-old Saudi, is alleged to have stabbed the victim several times...
RIYADH: A total of 4,326 male and female students started their local and regional summer program for 2015 under the sponsorship of the King Abdul Aziz and his Companions Foundation for the Gifted and Creativity (Mawhiba) throughout the Kingdom on Su...
BURAIDAH: The security patrolling team in Qassim detained a woman for driving a car on the streets of Buraidah.Her case was referred to the higher-ups for necessary action.According to Maj. Badar Al-Sahibani, spokesman Qassim police, the woman is ide...
RIYADH: Recent statistics announced by the Saudi Commission for Health Specialties, which coincided with consensus surveys in the Kingdom for the year 2014, revealed that there is only one doctor for each 800 people, and one nurse for every 285 peopl...
Indian expats have paid glowing tributes to one of its most beloved presidents and iconic leaders on Tuesday, as condolences poured in from various parts of the Kingdom for A.P.J. Abdul Kalam following his sudden death on Monday.Hemant Kotalwar, char...

Stay Connected

Facebook