China and France buy big into US energy sector

CHINA’S SINOPEC and France’s Total made major purchases into the US energy sector yesterday, pouring $4.5 billion into deals to buy into booming production from shale rock formations.

The ventures showed that the global appetite for US energy assets remained strong, with foreign oil and gas producers eager to invest in several of the mostly undeveloped fields that are believed to hold billions of cubic feet of natural gas and liquids.

Sinopec’s Sinopec International Petroleum Exploration Production made its first foray into US shale with a $2.2 billion investment to create a joint venture with Devon Energy.

That gives Sinopec a one-third interest in five fields, while Total’s $2.3 billion deal with Chesapeake Energy is its second joint shale venture with the US company.

The investment in the development of US shale gas reserves in Ohio in the latest example of global energy companies piling into burgeoning new energy sources.

In a deal with Chesapeake Energy, which the US group announced in November without identifying its partners, Total will take a 25 per cent stake in a joint venture covering the Utica Shale area of eastern Ohio.

Total paid $610 million to Chesapeake and $290 million to a US- based group called EnerVest, the other partner in the venture. Chesapeake will receive another $1.42 billion contribution to drilling and well-completion costs, expected by the end of 2014, it said.

Total Exploration and Production president Yves-Louis Darricarrere said: “This is consistent with our strategy to develop positions in unconventional plays with large potential and, in this case, with value predominantly linked to [the] oil price.”

Total has previously had a joint venture with Chesapeake in Texas.

US oil and gas producers have been in a frenzied land-grab in recent years to buy up rights that allow them to tap into the lucrative fields under development in Texas, Pennsylvania, Ohio and other states.

That has left many looking for deep-pocketed partners to form joint ventures to help pay for the expensive hydraulic fracturing technology that allows them to crack the brittle shale rocks and extract the natural gas and other products. – (Reuters/Bloomberg)