CNOOC cuts $1b shale gas deal in US

09:49, October 12, 2010      

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China's largest offshore oil giant will pay $1.08 billion for a one-third stake in US gas company Chesapeake Energy's shale gas project in Texas, a move after a flurry of overseas investment in traditional oil and gas, CNOOC Ltd announced on its website Monday.

The deal will provide CNOOC with a 33.3 percent share in Chesapeake's 600,000 net oil and natural gas leasehold acres in the Eagle Ford Shale project in South Texas.

CNOOC will also fund 75 percent of Chesapeake's share of drilling and other costs.

The transaction is expected to close in the fourth quarter of this year.

"CNOOC Limited has the desire and ability to establish itself in shale oil and natural gas in a suitable scale by cooperating with a leading company such as Chesapeake, which we believe will benefit both parties," Fu Chengyu, chairman of CNOOC Ltd, said in the statement.

"This deal is to … acquire a minority interest and for American companies to use that capital to go out and develop American oil fields and to reduce oil imports," said Aubrey McClendon, Chesapeake's CEO.

As the operator of the joint project, the Oklahoma City-based Chesapeake is the sec-ond-largest producer of natural gas and the most active driller of new wells in the US.

Shale gas is an unconventional gas resource reserved in shale rock. The International Energy Agency says China has reserves of 26 trillion cubic meters of shale gas, but the country lacks the core technologies to utilize it. Experts said the unconventional gas is expected to make up 15 percent of China's domestic supply by 2020.

"For the Chinese oil giants, it's harder and harder to invest into overseas oil and natural gas assets," said Lin Boqiang, director of the Center for Energy Economic Research of China in Xiamen University. "So, pursuing unconventional energy is an inevitable road to take."

Source: Global Times


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