Mitsui & Co Makes Big Bet on Shale Gas
Anadarko Petroleum has agreed a $1.4bn deal with Mitsui & Co. the Japanese trading and investment group, to sell a minority stake in its Marcellus Shale natural gas project in Pennsylvania.
The deal announced on Tuesday will give Mitsui control of 32.5 per cent of Anadarko’s shale-gas assets in the state, where most of the 250,000 sq km Marcellus deposit is located.
The US natural gas producers have been entering into these joint ventures to help fund development of the shale – a highly technical and expensive process – while giving foreigners access to their experience and technology.
The Japanese company said it planned to spend another $3bn-$4bn on exploration and extraction, making Marcellus one of its largest energy investments. It said it was counting on rising demand in the US for natural gas as an alternative to coal and oil.
Natural gas is about 30 per cent less carbon intensive than oil and 50 per cent less than coal, but it still emits carbon. That makes it a less attractive option to lawmakers seeking to curb carbon emissions than renewables, yet natural gas is needed to back up wind and solar.
The industry believes Congress and governments worldwide will have to turn to natural gas as a bridge fuel until renewables can power a substantial portion of electricity demand. That has led to a series of joint-venture deals similar to Mitsui’s in the past two years as an increasing number of foreign energy companies eager to tap into America’s vast natural gas reserves seek to invest in independent companies, while estimates of US supplies continue to increase.
BP and BG Group of the UK; Statoil ASA the Norwegian energy company; and Eni, the Italian oil company, have all bought into the US gas industry in the past year to gain access to the US industry while tapping into the independent groups’ experience and technical expertise.
Like other Japanese trading houses such as Mitsubishi and Marubeni, Mitsui has expanded from its original import-export business to become an important financial backer of commodities and energy projects. It owns a Y250bn ($2.7bn) interest in Russia’s Sakhalin-2 liquefied natural gas project, its biggest such investment.
Mitsui expects the Marcellus development to last 60 years and produce 360m to 460m cc ft of gas a day at peak. Most of the $3bn-$4bn in extra development would be spent in the first 10 years to drill “a few thousand wells”. It intends to close the deal on March 15.
Source: Financial TImes