Tuesday, January 5, 2010

Big Oil Continues to Move Into Natural Gas

Last month Exxon bought XTO, a large player in the "unconventional" natural gas field. Yesterday's announcement that Total was investing in a portion of Chesapeake's shale gas fields continues the trend of the large integrated oil producers towards natural gas.

The advantages of natural gas - clean burning, large US availability - have significant appeal to the large integrated oil companies that have struggled with replacing reserves.

Total in $2.25bn gas deal with Chesapeake

Total on Monday became the third big European energy company to buy into Chesapeake Energy’s US shale gas assets. The French oil producer will pay up to $2.25bn for 25% of Chesapeake’s assets in Texas Barnett Shale, $800m of it in cash and the rest by funding 60% of the project’s costs over the next 5-6 years. BP of the UK and Norway’s Statoil in the past 18 months signed similar deals with Chesapeake. Analysts said the deal’s price – $63,000 per barrel of current production – was in line with recent deals.