Analysis: National Oil Companies Lag Behind in Mergers and Acquisitions Market, Opportunity for Growth Ahead
The global mergers and acquisitions market in the oil and gas industry has been heating up, with international oil companies (IOCs) taking the lead in recent years. However, a recent analysis from Wood Mackenzie has revealed that national oil companies (NOCs) have been notably absent from the action, with their international spending seeing a significant decline.
According to Wood Mackenzie, NOCs’ international M&A spend has plummeted from over US$30 billion per year between 2009 and 2013 to less than US$5 billion between 2019 and 2023. The share of global spend by NOCs has also dropped from nearly 50% at its peak to less than 5% today.
Neivan Boroujerdi, Director of Corporate Research at Wood Mackenzie, noted that while NOCs were once major players in international business development, their M&A activity has slowed in recent years. However, with attractive valuations and strong financial ratings, the incentives for NOCs to pursue international expansion have never been greater.
Boroujerdi also highlighted the emergence of Middle East NOCs as significant players in the industry, with plans to increase oil and gas production by 2050. These NOCs are looking to diversify their portfolios and expand internationally to achieve critical mass.
In Asia, countries are facing a growing energy demand that outstrips local supply, leading to a projected oil and gas shortfall by 2030. Chinese NOCs are looking to reduce import reliance and secure overseas resources to hedge against volatility in the market.
Despite the recent wave of mega-mergers in the oil and gas sector, there are still opportunities for NOCs to make acquisitions. Greig Aitken, head of upstream M&A at Wood Mackenzie, emphasized that deal pricing remains favorable outside of North America, with high-quality opportunities available internationally.
As the industry continues to evolve and companies shift their focus back to oil and gas portfolios, competition for acquisitions is expected to increase, pushing up deal prices. Fast movers in the market are likely to benefit from these opportunities.