(Bloomberg News) Asian and European energy producers are spending billions of dollars to amass stakes in oil and natural-gas discoveries from Ohio to British Columbia, even as earthquakes and tainted water threaten to stall the biggest drilling boom in at least two decades.
Total SA, Europe's third-largest oil company, and China Petrochemical Corp., that nation's second-biggest crude producer, committed $7 billion to U.S. and Canadian shale rock formations during the past two weeks. The investments are aimed at tapping the expertise of smaller explorers including Devon Energy Corp. and Chesapeake Energy Corp. that pioneered techniques employed to crack previously impervious shale.
The potential rewards from shale regions such as the Utica and Marcellus formations in the eastern U.S. are too big for overseas explorers to ignore, said Mark Hanson, an analyst at Morningstar LLC in Chicago.
A New Year's Eve earthquake in Youngstown, Ohio, linked to a well used to store drilling wastewater prompted the state to halt operations at five such wells. Separately, the U.S. Environmental Protection Agency is studying whether intensive shale-drilling practices pose a danger to drinking water.
"These shale prospects are exploration frontiers and the big international players see them as a runway to growth," Hanson said. "They are acquiring stakes not only to learn how to drill these kind of formations in other parts of the world, but to understand how to get their arms around prospects of this size."
Sinopec Group, Devon
China Petrochemical, known as Sinopec Group, yesterday agreed to buy a one-third stake in five Devon exploratory projects in the U.S. for $900 million. The Beijing-based company also will provide as much as $1.6 billion to cover Devon's future drilling costs, Oklahoma City-based Devon said in a statement.
The deal followed Sinopec Group's C$2.2 billion ($2.16 billion) acquisition of Daylight Energy Ltd. on Dec. 23 to get access to the Calgary-based company's gas and oil projects in western Canada.
Sinopec Group and domestic rivals China National Petroleum Corp. and Cnooc Ltd. are seeking to learn how to tap shale formations at home that the U.S. Energy Information Agency estimates may hold 1,275 trillion cubic feet of gas, or 12 times China's so-called conventional deposits.
Total agreed to pay $2.32 billion yesterday for a 25 percent stake in 619,000 acres in a section of the Utica shale rich in butane and propane that sell at a premium to gas. Chesapeake will receive $2.03 billion and EnerVest Ltd. will get $290 million.
Total has been a partner with Chesapeake in another shale formation, the Barnett, near Fort Worth, Texas, since 2010. The company plans to transfer what it learns about cracking dense shale from Chesapeake's experts to shale prospects in Africa, Latin
America, Australia and Europe.