Skip to comments.Foreign investors play large role in U.S. shale industry
Posted on 04/08/2013 7:16:29 AM PDT by thackney
In early 2013, Sinochem, a Chinese company, entered into a $1.7 billion joint venture with Pioneer Natural Resources to acquire a stake in the Wolfcamp Shale play in West Texas. This investment highlights a renewed trend toward foreign joint ventures. Since 2008, foreign companies have entered into 21 joint ventures with U.S. acreage holders and operators, investing more than $26 billion in tight oil and shale gas plays.
Investment in shale plays in the United States totaled $133.7 billion between 2008 and 2012, as part of 73 deals. Joint ventures by foreign companies accounted for 20% of these investments. The rest of the investments were either part of outright acquisitionssuch as the Australian BHP Billiton oil company's acquisition of Petrohawk Energy Corp.or were joint ventures among American companies (such as Hess and Noble Energy with Consol Energy) and financial institutions.
Most of the foreign investment in these joint ventures involved buying a percentage of the host company's shale play acreages through an upfront cash payment with a commitment to cover a portion of the drilling cost. Foreign investors in joint ventures pay upfront cash and commit to cover the cost of drilling extra wells within an agreed-upon time frame, usually between 2 to 10 years. Both U.S. and foreign companies benefit from these deals. U.S. operators get financial support, while foreign companies gain experience in horizontal drilling and hydraulic fracturing that may be transferable to other regions. Plus, foreign companies can operate in a stable market with a sound legal system and low political risk. In addition, exploration and development opportunities are decreasing in much of the rest of the world. While foreign companies may pay sizable initial costs through joint ventures, these deals can be considered a cost of entry to the development of hydrocarbons through the latest technology.
Most of the recent joint venture deals with foreign companies shifted from the dry natural gas plays to more liquids-rich areas such as the Eagle Ford, Utica, and Wolfcampa trend similar to domestic operations. All shale plays contain some liquids, but those with a higher liquid-to-gas ratio are more attractive because of the higher value of hydrocarbons that have crude oil and petroleum liquids in addition to natural gas.
Thanks for the info.
It use to be the USA that developed oil fields all around the world now not so much. Just more of the fallout from failed government policies.
How smart is China? They take their trade surplus and buy US Treasuries. Occassionally they buy hard assets like this. But the bottom line is the only thing a US dollar is good for is to buy something from the US.
We wont save our money and make our investments. We spend and borrow to spend and let someone else make the investments. So if we are to have oil, gas, factories, and infrastructure someone has to provide the capital.
At least China likes oil, gas, and omigosh...coal.
Buy a few shares in the little public companies such as SD, UPL, LEI and many many others and hope for a buyout at double your entry point. Natural Gas at only $4.06 in North American vs the $18-22 in Asia and Europe means huge potential for profit as exports grow. The liberals used to see Natural Gas a clean energy, but now we must fear that they see it as a way America can become stronger rather than taking her place as a nurtered nation which relies on diplomacy alone....