The number of transactions in the oil and gas sector in the Middle East and north Africa (MENA) increased by 14% in 2012, and although political uncertainty in north Africa could depress economic activity in 2013, investment into MENA is expected to remain positive, according to professional services firm Ernst & Young. The firm predicted that, in the absence of outside shocks, MENA's oil and gas sector would remain robust in 2013.

According to Ernst & Young’s 'Global Oil and Gas Transactions Review', investors have become accustomed to making decisions in a highly uncertain environment, and while capital availability is improving, funding remains a challenge for smaller companies seeking to access this sector. Thus cash constraints, coupled with cost escalation, will become one of the main drivers of oil and gas deals in 2013, as larger companies which have stronger balance sheets are most likely to drive deals in MENA.

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MENA's upstream sector has experienced increased investment in recent years. Upstream activity in 2012 was dominated by Turkish firm Genel Energy, which brokered a 44% interest in the Bina Bawi exploration block in Kurdistan. Kurdistan emerged as a key FDI destination, with five of the biggest deals concerning assets and operations occurring in this oil-rich region in Iraq.