The Shifting Landscape of Global Upstream M&A: Why Natural Gas is the New Frontier

The global energy sector is undergoing a seismic shift in upstream M&A activity, with natural gas emerging as the dominant force in a market once dominated by oil-centric deals. From 2023 to mid-2025, global upstream M&A deal values have diverged starkly between the two commodities. While oil-focused transactions have stalled—plagued by volatile prices, regulatory headwinds, and a cooling of the Permian Basin—natural gas has surged forward. By the first half of 2025, gas accounted for 62% of traded resources in Q1 and a record 82% in Q2, the highest since 2019. This shift is not a fleeting trend but a recalibration of capital allocation in response to evolving demand drivers, infrastructure needs, and the energy transition.

The Decline of Oil-Centric Deals

The oil sector's struggles are well documented. North America's share of global upstream deal value dropped from 71% in Q1 2025 to 51% by midyear, reflecting a broader slowdown in US shale. The Permian Basin, once the epicenter of consolidation, now faces constrained takeaway capacity, with pipeline utilization exceeding 90%. Deals like Chevron's $26.6 billion acquisition of Calpine Corp highlight the sector's pivot to clean energy, but oil's role in M&A remains constrained. Volatility in Waha Hub prices—often below zero in 2024—has further dampened investor appetite.

Meanwhile, oilfield services M&A hit $19.7 billion in the first nine months of 2024, but this resurgence is largely a reflection of desperation rather than growth. High acreage prices and the need to optimize tier 2/3 assets have driven activity, but the sector's fundamentals remain fragile. As one analyst noted, “Oil is the asset you can't afford to abandon, but it's no longer the asset you want to own.”

The Gas Surge: Strategic Reallocation in Action

Natural gas, by contrast, is gaining traction as a strategic asset. Its dual role as a transition fuel and a feedstock for LNG projects has made it a cornerstone of energy security and decarbonization strategies. In North America, gas-focused consolidation is accelerating. The US shale sector, while past its peak for oil, is seeing a rebirth in gas plays. In Canada, upstream M&A hit $11.9 billion in H1 2025, driven by deals like Whitecap Resources' $5.9 billion acquisition of Veren and CNRL's purchase of Shell's Athabasca Oil Sands stake.

The Montney region in British Columbia has become a focal point for gas developers, with its low-cost production and proximity to LNG export terminals. Similarly, the US is seeing a surge in gas infrastructure, including the 2.5 Bcf/d Matterhorn Express Pipeline, which will alleviate bottlenecks and unlock new supply. For investors, this means prioritizing exposure to North American gas producers with strong acreage in these regions and robust midstream partnerships.

Southeast Asia: The Deepwater Gold Rush

Beyond North America, Southeast Asia is emerging as the next frontier for gas-focused M&A. The region is projected to unlock $100 billion in investments by 2028, driven by deepwater discoveries in Indonesia and Malaysia. Mubadala Energy and Harbour Energy's 11 Tcf find in the Andaman Sea offshore Sumatra is a case in point, with potential monetization hinging on the completion of the Dumai Senkai pipeline.

Indonesia's Abadi LNG project, now targeting FID in the latter half of the 2020s, and BP's $7 billion Tangguh Ubadari CCUS project exemplify the scale of opportunity. Meanwhile, Malaysia's Lang Lebah and Kasawari fields are advancing despite delays, with Petronas leading the charge. For investors, Southeast Asia's deepwater projects offer high-impact, long-term returns, though they require patience due to infrastructure lags and regulatory complexities.

The Role of LNG and AI-Driven Demand

Natural gas's resurgence is also tied to two macroeconomic tailwinds: LNG demand and AI-driven energy needs. By 2030, data centers are projected to consume 9% of US electricity, with gas-fired power plants serving as a reliable backup for renewables. This creates a structural demand for gas, particularly in regions with LNG export capacity.

In Southeast Asia, LNG projects like Eni's Geng North and Indonesia's IOG 4.0 plan aim to position the region as a global LNG hub. Similarly, Vietnam's Blue Whale field and Brunei's Merpati-Meragi project are designed to meet both domestic and export needs. Investors should focus on companies with stakes in these projects, as well as those developing CCUS technology to enhance gas recovery and meet emissions targets.

Strategic Investment Recommendations

1. North American Gas Plays: Prioritize companies with exposure to the Permian Basin's gas infrastructure and the Montney's low-cost production. Look for firms with midstream partnerships to mitigate takeaway risks.
2. Southeast Asian Deepwater Projects: Target developers with large, undeveloped gas discoveries and partnerships with NOCs. Monitor FID timelines and infrastructure progress (e.g., Dumai Senkai pipeline).
3. LNG and CCUS Innovators: Invest in companies leveraging CCUS to unlock stranded gas assets and enhance LNG project economics.
4. Midstream Partnerships: Consider midstream players building out takeaway capacity for North American and Southeast Asian gas, which will be critical for monetization.

The energy transition is not a zero-sum game. While oil's dominance wanes, natural gas is carving out a new role as a bridge to a low-carbon future. For investors, the key is to reallocate capital toward assets that align with this shift—North American gas plays and Southeast Asian deepwater projects—while hedging against volatility with exposure to LNG infrastructure and CCUS. The next decade will belong to those who recognize gas not as a relic of the past, but as the linchpin of the energy transition.