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American Shale Deposits Garner International Interest

China Invades U.S. Interests

Written by Brian Hicks
Posted January 6, 2012

North America’s rich shale deposits are attracting the attention of some of the worlds largest international oil companies and could prove to be one of the more lucrative trades in 2012.

In a recent report by Reuters, France’s Total (NYSE: TOT), hindered by strict governmental regulations on developing unconventional hydrocarbons in France, invested $2.5 billion in Chesapeake Energy Corp (NYSE:CHK) to explore Utica shale formations in Ohio.

Chesapeake predicts that the deal alone could create as many as 25,000 high-paying jobs within the next few years.

China Petroleum & Chemical Corp, also known as Sinopec(NYSE: SNP), obtained a one-third interest in Devon Energy Corp’s (NYSE: DVN) shale projects for $2.2 billion to explore oil and gas projects ranging from Tuscaloosa Marine shale in Alabama and Mississippi to the Niobrara in Colorado.

The fervor of international corporations striving to invest in American shale mining industries shows no indication of slowing down.

The Financial Times reports that Marubeni, the Japanese trading house, is currently working out a $1.3 billion deal to purchase a share in a Texas shale project.

According to Simone Sebastian of the Houston Chronicle, the advantage of creating a joint venture with international investors for U.S companies is that investors will shoulder a majority of the costs for drilling and well completion.

Total will pay for 60 percent of Chesapeake’s drilling costs, roughly $1.63 billion, while Sinopec plans to cover 70% of Devon’s drilling costs, totaling about $1.6 billion.

The Sinopec and Total deals are a shining beacon of hope in an otherwise dwindling U.S. economy, as the drilling boom has resulted in a growing market for businesses that service oil drillers, such as steel-pipe producers.

The Wall Street Journal reported industries that use natural gas as feedstock also stand to profit from the recent influx of international investment. 

The resulting low natural gas prices act as an incentive for chemical and fertilizer plants to stay domestic when just five years ago the same industries would have set up plants overseas.

Until next time,

Nate

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