Despite the drop in commodity prices such as oil, Asia-Pacific was a bright spot for energy M&A deals in 2015. Last year alone there were 200 completed energy deals in the region, slightly less compared to 2014 statistics.
“Driven by ongoing uncertainty towards global market conditions, energy corporates have been rationalizing their operations in the region,” highlights a research note from international law firm Eversheds. “With markets unsure how long depressed prices will continue, producers are seeking to cut costs through restructuring and in some cases, widespread divestment programs.”
Of the 200 completed 2015 energy deals in Asia-Pacific, Chinese related deals accounted for almost half of M&A activity in the region, with a total deal value of around US$56 billion. Early last year for example Chinese state-owned petroleum company Sinopec sold a 29.99% stake in its retail division to a group of 25 companies for US$17.4 billion. Late last year, Shenzhen Energy acquired China Hydroelectric Corporation from NewQuest Capital for US$492 million.
The Chinese activity in energy M&A looks to be quite promising in 2016 following reforms by the central government to boost efficiency and clean energy within the Chinese economy. Moreover, industry leaders in China look keen to expand their company’s footprint outside of China.
In a briefing last August, PetroChina’s president Wang Dongjin said, “Timing is really important now. We have been tracking some assets for a while and are waiting for the time to come.” Chinese-led cross border energy M&A deals were approximately US$10.8 billion in 2015 up from US$4.1 billion in 2014.
Based on S&P Capital IQ data, there have been already 34 announced energy M&A deals in Asia-Pacific with 12 of those being China related. “Chinese energy policy will play a key role in boosting Asia’s clean energy investment in 2016, but in the shorter term, a continued oil price slump should mean 2016 is another strong year for oil and gas M&A,” predicts Eversheds.
