Overall, the sector is expected to see between MYR26bn and MYR30bn in mergers and acquisitions (M&As) and capital projects this year, with M&As accounting for MYR8bn of that, the firm was cited as saying at its Southeast Asia Oil and Gas Summit this week.
"(The year) 2014 will be an interesting and critical year for O&G players as they seek growth in a challenging environment with continuing pressure to improve productivity from substantial investments in major capital projects that are yet to come on stream," said Deloitte Southeast Asia M&A tax leader Steven Yap.
Containing costs and applying improved technologies are the two main issues O&G players will be focusing on, he added. These two factors are driving many companies to rationalise and consolidate as they position themselves for future growth, Yap noted.
"With Malaysia stepping up to the next level of the value chain as an O&G hub in Southeast Asia, it would not be surprising to see many companies being compelled to reorganise to right size through M&As, especially to scale up and build capacity to be able to effectively deliver their services from exploration and production to major capital projects," Yap said.
Recent years have seen the merger of two major domestic players SapuraCrest Petroleum and Kencana Petroleum in Malaysia, while other smaller players have attempted to scale up rapidly through acquisitions of other companies overseas such as Yinson's purchase of Fred Olsen Production.
Deloitte Malaysia energy and resources leader Nizar Najib meanwhile said the O&G sector is poised for massive growth in the next few years as it will be pushed by Petronas' planned capital expenditure of MYR300bn between 2011 and 2016 as well as investments in key areas such as enhanced oil recovery (EOR), marginal fields and deepwater exploration.
"In the near term, we expect to see an increase in oil output due to various initiatives such EOR, marginal fields and deepwater exploration," he concluded.
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