As Vietnam’s oil and gas sector faces global challenges, Deloitte’s regional mergers and acquisitions (M&A), tax and Singapore energy leader Steven Yap put VIR’s Bich Ngoc in the picture during the sidelines of the firm’s recent “Oil and Gas Summit: A SEAmless world of opportunity” seminar in Hanoi.
Since 2010, most of the larger upstream M&A transactions of the targets located in Southeast Asia took place either in Indonesia or Vietnam, except for Salamander Energy’s July 2010 acquisition into Block B8/38 (Bualang Field) from Soco International in Thailand. All the transactions were asset transactions, such as farm-ins or farm-outs, except for Keppel Corp.’s July 2012 acquisition of a 20 per cent shareholding in Kris Energy from First Reserve Corp.
Most of the transactions including Perenco S.A.’s February 2012 with $1.29 billion acquisition into Block 15-1, Block 15-2 and a 16.5 per cent stake in the Nam Con Son pipeline and Eni Vietnam’s June 2012 with $75 million acquisition into Blocks 105-110/04 and 120 in Vietnam – were for assets located offshore in shallow waters. Only two transactions were for deep-water assets, one by China Petrochemical Corp. into Rapak, Ganal and Makasar Strait deep-water blocks and Royal Dutch Shell into Masela. Both are in Indonesia. We can expect the level of deepwater M&A activity to increase in the future as exploration activity in the region moves to deeper offshore areas. These transactions were driven by various strategic agendas such as international oil companies or national oil companies’ portfolio rationalisation, capital raising, risk sharing, geographical expansion or bringing in a technical partner.
In the recent years, big oil and gas M&A deals involved China and Russia, while Vietnam’s state-run PetroVietnam has recently courted partners from Japan and Europe. What other nations might become involved?
Most players from the main countries are already participating in Vietnam, but possibly new countries could be the United Arab Emirates and Kazakhstan.
In the recent years, there have been some big M&As in Vietnam’s oil and gas sector, like Perenco SA (France) which bought out ConocoPhillips’ stakes in $1.3 billion, Russia’s TNK – BP bought out England’s BP’s asset, and Royal Dutch Shell sold its stakes to Siam Gas from Thailand. Can you comment on these deals?
There are different motivations for both the buyers and sellers. Some may be refocusing their interests in particular area, country or countries for different reasons. That can include size of potential discovery especially with limited financial resources to opportunities to enter Vietnam. The exits would and have been counter-balanced with entry by different players. Different majors could come in and replace the super majors who could be refocusing in potentials for larger reserves.
Will Vietnam retain its appeal for foreigners in the oil and gas sector?
Vietnam would still have its attractiveness. There are different factors influencing oil and gas players making their investments and they are relative to the choices available to them at any given time. The type and appetite of the partners, access to choice partners with technology, access to key skilled labour, balancing price differentials between domestic market obligations and external market, effective legal and fiscal environments, reliable infrastructure are some influencing factors.
By Bich Ngoc