The number of crossborder projects in the coal, oil and natural gas sector is at its lowest level in a decade, according to data from greenfield investment monitor, fDi Markets. In 2012, fDi Markets recorded 240 new projects in the sector, 29% less than in 2011 and 60% less than in 2008, when investment into the sector hit its highest point. With 112 projects recorded in the first half of 2013, the outlook for the sector does not look to be improving.
The slowdown in the coal, oil and natural gas sector is even more drastic when looking at capital expenditure. The value of deals decreased from $76.2bn in 2011 to $28.3bn in 2012. In the first half of 2013, $10.2bn had been invested in the sector. Between 2008 and 2012, Indonesia, Australia and Russia have recorded the sharpest declines in inward FDI in the coal, oil and natural gas sector, with project numbers decreasing by 76%, 73% and 64%, respectively.
In 2008, the US and the UK were the top two destinations for commodity-related FDI and, while they remained the most attractive destinations in 2012, they did both witness a slight decline in the number of commodity-related projects. The two countries were also the leading sources of investments in the coal, oil and natural gas sector, in both 2008 and 2012, although the number of investments decreased markedly in the four years. In 2008, the US accounted for 112 projects in the sector, compared with 51 in 2012. The UK accounted for 43 in 2008 and just 19 in 2012.
M&A activity in the oil and natural gas sector has also slowed in recent years. According to the most recent Oil and Gas M&A report published by global consultancy Deloitte, the overall value of deals made in the first six months of 2013 fell by 29%, while the volume fell by 76%, to $38.7bn. The report noted that “regulation and taxation of the oil [and] gas industry remains source of uncertainty in the US”, while “global economic uncertainty dampened activity across Canada, Europe and Asia”.
At the same time, the Deloitte report stated that it is still too soon to predict whether this decline is a temporary response to increased investor activity at the end of 2012, or if it will be the start of a longer trend.