Written by Kurts Davis Jr | From Ventures Africa

 An upsurge of Mergers and Acquisition (M&A) in East Africa is coming. Bold prediction maybe. Eni previously indicated a desire to farm down its investment interest in the region. But it is the recent news that Anadarko is considering a sale of its oil & gas assets in Mozambique and Tanzania that gives the greatest credence to the prediction.

The Brent price hovers between $60 to $70 and capital spending budgets in the E&P space are down nearly 25% in 2015. East Africa will feel significant pain in the process as many corporate players farm down or just outright exit to concentrate their spending in regions, particularly North America, with lower capital requirements and less risky returns.

Investors – E&P companies and private equity firms alike – have waited anxiously for this day. Yet the low oil price environment and capital investment reductions across the E&P space will challenge the ability of buyers and sellers to find comparable ground. There are fewer buyers these days, compared to 2013 and valuations are not clear.

High capital gains taxes in Mozambique and Tanzania are concerning coupled with previous requests for retroactive payments. Ophir is believed to consider the past retroactive tax payment as another driving force in its reconsideration of being in the region.

And what does the LNG market offer as returns in light of the current price outlook? Many analysts currently predict that slowing growth in Asia and Europe combined with continued growth in LNG supply does not bid well for prices in East Africa. Could governments and corporate players renegotiate the risk sharing or structure for investment in local assets?

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