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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Asian Energy Giants Plan A Spending Spree In Oil & Gas

Good news for mining finance this week. With Australia’s EMR Capital announcing it has raised $860 million for a second investment fund targeting gold, copper, potash, and coking coal projects.

But elsewhere on the planet, some other big resource investors announced even larger investment plans. In the global oil and gas sector.

Not one, but two firms said this week they are planning a spending spree on petro-acquisitions over the coming year. Both of them based in the energy-hungry climes of Asia.

The first is Indonesia state oil company Pertamina. Which told Interfax it plans to radically increase spending on project acquisitions for 2017.

Pertamina said it is currently flush with cash. With net profits for the first three quarters of 2016 having doubled to $2.8 billion (as compared to just $1.4 billion last year), due to better margins on the company’s refining operations in today’s lower oil price environment.

With these increased profits in hand, Pertamina said it will increase its capital spending budget for 2017 to between $5 billion and $7 billion. A significant rise from the $4 billion budgeted for 2016.

This year’s budget included $700 million for upstream project acquisitions — which Pertamina deployed for stakes in projects in Gabon and Tanzania. And if the projected budget increase for next year goes ahead, there could be even more acquisitions coming globally.

And they’re not the only Asian energy giant on the hunt for projects. Related: Saudi Arabia Issues Warning To Trump: Don’t Stop Saudi Oil Imports

Japanese energy companies also said this week they’re going after international acquisitions in a big way. With state-owned Japan Oil, Gas and Metals National Corporation (Jogmec) saying Wednesday it has been cleared by the government to fund a massive wave of M&A.

Jogmec said it now has access to up to $5.2 billion yearly to fund oil and gas acquisitions for Japanese energy firms. Giving the firm a massive purse to spend on buying companies and projects — which Japanese officials said is a key part of securing the country’s energy future.

Japanese firms have traditionally looked around the world for acquisitions — meaning that projects almost anywhere could be targeted as part of this spending spree. Watch for deals being struck by both Pertamina and Jogmec, which could provide some big capital injections for projects, or hefty returns for shareholders of takeover companies.

Here’s to going shopping.

By Dave Forest

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