Fracking: Foreign Firms Fund Pacts

Tuesday, January 3, 2012 @ 06:01 PM gHale

Natural gas is catching the eye of foreign investors lately as two huge companies, China’s Sinopec Group and France‚Äôs Total SA, picked up pieces of separate shale oil companies in multi-billion dollar deals.

Sinopec Group said it will pay $2.2 billion to acquire a third of five shale oil and gas assets in the United States from Devon Energy Corp.

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Sinopec International Petroleum Exploration & Production Corp (SIPC), a unit of Sinopec Group, will pay 30 percent in cash and the remaining 70 percent in carry, and expects to complete the whole payment by the end of 2014.

Meanwhile, Chesapeake Energy Corp. is sell part of its Ohio oil and gas business to a unit of Total for $2.3 billion.

Total will pay Chesapeake and a smaller partner for access to Chesapeake’s 619,000 acres in Ohio with a 25 percent ownership interest.

The land, spread across 10 Ohio counties, sits atop the oil-rich Utica shale formation. The petroleum industry wants to tap Utica as oil prices rise. Doing so requires drillers to tunnel several thousand feet below the surface and start the fracking process, which unlocks oil and gas trapped within.

Chesapeake, based in Oklahoma City, OK, has been aggressively snapping up land in the U.S. to give it more access to oil deposits. The company owns 1.5 million acres with access to Utica shale. Overall, it plans to more than double its oil production in the next two years, with production reaching 72 million to 76 million barrels in 2013.

Chesapeake, which will operate the joint venture with Total, is getting $610 million up front. It expects to receive an additional $1.42 billion by the end of 2014.

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