Monday, January 9, 2012

Oil Shale - Theme for 2012

Theme for 2012 - Shale Oil explorers


Shale Bubble Inflates on Near-Record Prices

Surging prices for oil and gas shales, in at least one case rising 10-fold in five weeks, are raising concern of a bubble as valuations of drilling acreage approach the peak set before the collapse of Lehman Brothers Holdings Inc.
Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc. (IHS)
Marubeni Corp. (8002), the Japanese commodity trader, last week agreed to pay as much as $25,000 an acre for a stake in Hunt Oil Co.’s Eagle Ford shale property in Texas. The price, which includes future drilling costs, exceeds the $21,000 an acre Marathon Oil Corp. (MRO) paid last year for nearby prospects owned by KKR (KKR) & Co.’s Hilcorp Resources Holdings LP. In the Utica shale of Ohio and Pennsylvania, deal prices jumped 10-fold in five weeks to almost $15,000 an acre, according to IHS figures.
“I don’t feel confident that the prices being paid now are justified,” Del Pozzo said in a telephone interview from Norwalk, Connecticut. “I’m wary.”

Vast New Resources

The world’s largest energy producers, including Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA), are revisiting onshore U.S. prospects passed by in recent decades in favor of deep-water finds in West Africa and the Gulf of Mexico. New drilling techniques developed in the Barnett shale of north Texas have enabled companies to crack previously-impervious formations.
Overseas explorers such as China Petrochemical Corp. and Total SA (FP) want to learn from U.S. partners so they can exploit vast shale resources in Europe and Asia, said Mark Hanson, an analyst at Morningstar LLC in Chicago.
The U.S. holds an estimated 2,543 trillion cubic feet of gas, enough to meet domestic demand for more than a century at current rates of consumption, according to the Energy Department in Washington. Shale accounts for 862 trillion of that total, or 34 percent. In China, shale formations hold an estimated 1,275 trillion cubic feet of gas, 12 times as much as the nation’s so- called conventional fields.

Buying to Continue

The buying spree is likely to continue because international oil producers are eager to amass reserves in the U.S., which surpassed Russia in 2010 as the world’s largest source of gas, said Christian O’Neill, an analyst at Bloomberg Industries in Princeton, New Jersey.
Oil production also has blossomed in the world’s largest economy, rising to a 9-year high of 5.78 million barrels a day in October, the most recent month for which the Energy Department in Washington has figures.
Hunt, the closely held Dallas company founded by Texas tycoon H.L. Hunt in 1934, has only drilled “a handful” of wells in its Eagle Ford shale acreage, which means it doesn’t yet know how extensive or rich those holdings are, Del Pozzo said. Similarly, because drilling in the Utica shale in the U.S. northeast still is in its infancy, the geological characteristics and potential bounty of the region are hard to assess, said Manuj Nikhanj, head of energy research at ITG Investment Research Inc.
“The big risk is that people are jumping in with both feet too early,” Nikhanj said in a telephone interview from Calgary. “Of course, the other side of that is that if they wait, they risk missing out on what could turn out to be a big deal.”

2012 comes in with a strong oil theme.

Keystone pipeline delayed until after Presidential election.
 - Alberta Bakken Oil explorers affected.

Surging interests in Kurdistan Oil explorers.
- check the previous postings for Westernzagros, Vast, Longford

More research required here..........the Goombarh.

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