The U.S. began to experience a natural gas boom when hydraulic fracturing made extracting oil and gas from shale deposits profitable.
With the abundance of gas on the market, prices were pushed to a ten-year low. Now, even though there’s still plenty of oil and gas to extract, the strain of the low prices is propelling some companies to back away from natural gas production.
Chesapeake Energy (NYSE: CHK) recently made headlines as it began to sell natural gas assets to make up for a revenue shortfall and focus more on oil production instead.
And now French oil and gas major Total (NYSE: TOT), which is partnered with Chesapeake in Texas’ Barnett shale and Ohio’s Utica shale, is shying away from natural gas as well.
On Monday, the company announced it would not be taking on any new U.S. shale acquisitions in the future for as long as prices remain at dangerously low levels.
From Platts:
“Honestly, we’re losing money on Barnett [shale],” Total CFO Patrick de la Chevardiere said at a briefing in London.
“I’m not saying we’ll never do any more acquisitions in US shale gas and oil. But today we have a good balance between shale oil and gas, plus acreage in Argentina,” he added.
The Argentinian acreage is at the Neuquen basin, where Total is partnered with YPF (NYSE: YPF) and holds eight licenses covering over 1,548 square kilometers, or roughly 597 square miles.
Total also is trying to create a joint venture with Chinese state-owned Sinopec in order to develop a shale gas field in China’s Anhui province.
But like other companies, Total is largely moving towards the profit: oil exploration.
Oil was at an average price of $113.6 per barrel for the first half of the year in Europe. Companies like Total, BP (NYSE: BP), and Shell (NYSE: RDS.A) have been taking advantage of the prices, which are averaging 2% higher, and one of the main regions drawing exploration is Africa.
Until recently, many regions in Africa have been underdeveloped. But companies are finding profit there as exploration grows.
Total’s specialty is deep and ultra-deep water, and a number of its African projects provide that. The company believes these projects will allow it to increase its output by 25% over the next five years, particularly after 2015, to help it reach 3 million barrels of oil and gas a day – an all-time high.
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Total is already producing or developing 70% of the fields that will help it reach this increase, and it named its Egina project in Nigeria, its Kaombo project in Angola, and its Moho project in the Republic of Congo as the likely big producers after 2015.
It also recently signed a deal with Malaysian company Petronas for a 40% stake in offshore blocks 3 and area 6 in the Rovuma Basin, an area that has proved profitable in the past.
And its liquefied natural gas project in Angola, which is also partially owned by Chevron (NYSE: CVX), Eni (NYSE: E), BP, and Angolan company Sonangol, will likely begin shipping soon.
The project was originally slated to ship to the U.S., but the nation’s domestic shale gas success has rendered that unnecessary.
It could face several delays in the coming months, but de la Chevardiere hopes this won’t exceed six months.
That’s all for now,
Brianna Panzica
@brianna_panzica on TwitterEnergy & Capital’s modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.
