BHP petroleum chief confident of shale liquids developments | WPN World People News

Global mining, oil and gas major BHP Billiton Monday justified the company's $20 billion foray into US shale gas stating that shale liquids developments are now among the most attractive projects in the world.

Melbourne headquartered BHP's shale gas investments in the US has come in for scrutiny as the gas prices fell rapidly after BHP bought Petrohawk Energy and other shale interests last year.

The price fall from $13 to below $2 per 1,000 cubic feet of gas was due to spurt in production and an oversupply of shale oil gas in the United States.

"Shale developments offer strong returns on an individual well basis and are highly expandable in both the short and long term," said J. Michael Yeager, Chief Executive, Petroleum, in a presentation at the Australian Petroleum Production Exploration Association (APPEA) Conference on Monday.

Though current shale drilling and completion technologies recover very low amounts of the hydrocarbons in place, Yeager expressed optimism that evolving technology will bring about a change.

"The industry has a record of more than doubling recovery rates over time, as technology improves, and we expect to be a technology leader," the expert stated.

Yeager says the rise of natural gas as an energy source will prove the company was right.

The company's $20 billion foray into shale gas, comprising mainly the $12 acquisition of Petrohawk in July last year, is forecast to make up half of US gas output by 2030. BHP had in March 2011 also acquired Chesapeake Energy Corp in a $4.75 billion deal.

Market analysts fear that BHP may be forced to write down the value of the US shale gas assets.

In a media interaction, Yeager however pointed out, "Any near-term downward view on gas and its value as part of this has been more than offset by the liquids (oil)."

The company has over 1.6 million combined net acres across Texas, Louisiana and Arkansas with estimated recoverable resources of approximately 8.3 billion barrels of oil equivalent.

BHP Billiton wants to increase production from a current target of 100,000 barrels of oil equivalent a day to 350,000-400,000 barrels.

The BHP assets in the US include four giant fields- S Midland, Delaware, Hawkville and Black Hawk - with 50 year lives.

In the short to medium term horizon of five to ten years, Yeager admitted that the shale gas may not yield the expected returns but in the long term, as the gas market improves, the US assets would prove valuable resources.

"We'll be one of the strongest players in the (BHP Billiton) corporation for the next 20 years," he said.

Shale developments offer strong returns on an individual well basis and are highly expandable in both the short and long term Shale is ripe for a long term technology approach which few companies can execute," Yeager stated pointing out that shale gas is not the whole BHP story

He pointed out that early estimates for BHP Billiton Petroleum's Eagle Ford and Permian acreage indicate several billion barrels of liquids (oil) in place

The target is to recover about 1.5 billion barrels of liquids - about 500 million barrels more than the production reported in November last year, through large conventional resources and unconventional shale resources.

"Shale liquids developments are now among the most attractive projects in the world. The shale revolution shows how quickly and deeply things can shift," said Yeager.

Source: United States News.Net