Mergers and acquisitions (M&A) deals across Africa’s oil and gas upstream sector hit a new record of $21 billion in nine months but Nigeria, which is home to the continent’s second-largest oil reserves, is not at the party.
Deals such as mergers, acquisitions, asset sales, and debt financing help producers improve infrastructure and technical expertise, and boost economies, thus improving living standards.
Africa’s M&A deals across the upstream segment have increased by three times from $7 billion in 2021 to $21 billion in the nine months to September 2022, according to Rystad Energy.
BusinessDay’s findings showed major deals that have driven the increase in M&A spending across the continent include the agreement between global energy majors Eni and BP in March 2022 to create Azule Energy, merging both companies’ Angolan operations to create a new independent joint venture.
The 50/50 company is expected to be Angola’s largest oil producer with over 200,000 barrels equivalent a day (boe/d) of net oil and gas production and two billion barrels equivalent of net resources.
Also, London-listed oil and gas independent Afentra marked its entry into Angola in May, acquiring stakes in two offshore blocks – Block 3/05 and Block 23 – in the Lower Congo and Kwanza basins for $80 million.
In April this year, as part of a farm-out deal, Angolan state energy firm Sonangol entered into a $336 million deal with Sirius Petroleum and Somoil for the two firms to participate in producing Blocks 18 and 31, which are operated by BP.
With Angola taking over the number-one spot as Africa’s largest oil producer from Nigeria in June 2022, the deal, if it progresses, will increase investments across the country’s upstream sector, accelerating production even further.
Other deals include Eni’s acquisition of BP’s operating interest in two gas-producing concessions in Algeria, Tullow Oil’s merger with Capricorn, and Repsol’s sale of $4.8 billion worth of assets to EIG in Libya and Algeria.
Experts are bewildered that the federal government is yet to grant the ministerial consent necessary to seal a $1.3 billion planned deal between Seplat Energy Plc, a major energy company in Nigeria, and US-based ExxonMobil that could deliver higher taxes, increased production, and generate more oil revenue.
“The period of electioneering is causing a major obstacle to the Seplat/ExxonMobil deal which could make or mar foreign direct investments in Nigeria’s upstream sector, an industry under stiff competition from other climes,” Ayodele Oni, an energy lawyer and partner at Bloomfield Law Practice, said.
Elias & Co, a business law firm with a specialty in mergers and acquisitions, said transactions in Nigeria’s energy sector had been less busy lately compared to six years ago.
“It is far from being inactive,” analysts at Elias & Co said in a note.
Two weeks ago, the Nigerian National Petroleum Company Limited (NNPC) said it acquired the downstream assets of OVH Energy, the second-largest downstream company with over 380 retail stations across the country.
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Experts have raised concerns about the transparency and actual value of the NNPC/OVH deal, saying the secrecy might send wrong signals to the international community seeking to invest in the nation’s oil industry.
“NNPC should be more transparent and send the right examples for Nigeria to attract competitive investment. The country is losing a decisive battle for investment deals to African countries,” Ola Alokolaro, partner, energy and infrastructure at Advocaat Law Practice, said.
In Africa, Rystad Energy says buyers are targeting producing assets in a bid to capitalise on the current increases in oil and gas prices across the globe with the share of producing resources traded increasing from 44 percent in 2021 to 63 percent in 2022.
With the energy transition pushing for majors to diversify their portfolios, Rystad Energy’s data showed the majority of assets offloaded in 2022 were high-emissions oil fields, which accounted for 67 percent of the deals in 2022 compared to 58 percent in 2021.
The research firm forecast spending on M&A deals to continue to expand across the continent’s upstream segment through the end of the year as Africa turns into a hive of oil and gas exploration and production activities at the back of recent massive discoveries in Namibia by TotalEnergies and Shell.
“Another major factor driving Africa’s M&A is increased energy demand at a global scale as a result of the effects of the Russian-Ukraine war and energy transition-related matters,” Rystad Energy said.
