Financing the future energy landscape

Regional differences in private equity for oil and gas

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Private equity firms in oil and gas are currently most active in North America, Europe and the Middle East.

For North America, respondents cite continued faith in the region’s economic recovery, rising equity markets and stronger debt markets as investment drivers.

Also, firms have been particularly active in the unconventional oil and gas growth story in North America. Shale gas and oil are seen as significant opportunities for PE over the next five years.

Overall, the outlook is brightest for Latin America and Asia-Pacific. For those regions, 82% and 79% of respondents, respectively, expect PE activity to increase in the next 1-2 years.

Expectations of PE interest in oil and gas in the next 12—24 months

EY chart  showing expectations of PE interest in oil and gas beyond 2013

By country, respondents expect the highest level of PE activity to occur in the US, China, Russia and Brazil. Expectations for countries in the Middle East and Europe are lower.

“Latin America and Asia-Pacific will lead in new PE investments in the next two years. North America is recovering fast and again becoming an attractive area for new PE investments.”

— PE vice president, North America

Risk versus reward

Alongside the opportunities, each region brings its own risks.

Political risk was rated highest in Europe and Africa, due to the Eurozone crisis and political instability in North Africa.

For Latin America and the Middle East, respondents single out operational risk (including health, safety and environmental issues) as a primary hindrance to investment.

Overall, respondents are most worried about regulation. More than half cite regulatory issues as the biggest risks for the oil and gas sector.