Total’s Move Reveals International Focus on Shale Gas

French oil giant Total is the latest major oil company to access prolific shale gas fields in the U.S. They agreed to pay $2.3 billion for 25% interest in Chesapeake's acreage in the North Texas play. The Total deal is the 4th joint venture for Chesapeake following transactions with BP, Statoil and Plains Exploration and Production. The several deals brought in $10.8 billion.

The U.S. shale gas plays are similar to the early Texas oil plays in that discoveries then were small and were accompanied by high decline rates. While the shale trends are large, covering multiple counties, the volume of natural gas that can be obtained from a single well is limited by the amount of the reservoir accessed by fracturing. Still, as was the case with early oil wells, money could be made, often a lot of money. More importantly, now that the number of shale gas plays in North America appears to be large, it follows that the rest of the world is likely to be similarly endowed.

The race for shale gas in Europe is moving fast. The international majors, awakening to the potential of this resource, are now willing to take large stakes in existing ventures where the acreage position is attractive. With the limit to easy development of crude oil approaching, it is a logical move to step up development of natural gas which is plentiful and inexpensive to produce.

Source: Gerson Lehrman Group