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Researched by Industrial Info Resources (Sugar Land, Texas)--Shale gas production is less expensive than offshore production, and Total S.A. (NYSE:TOT) (Paris, France) is the latest European oil major to seize an opportunity to broaden its role in the North American shale market. Total upped its investment in the Barnett Shale gas fields, which cover northern Texas, by buying 75% of troubled producer Chesapeake Energy Corporation's (NYSE:CHK) (Oklahoma City, Oklahoma) assets in the shale play. Industrial Info is tracking more than $34 billion in projects involving Total.
Total, which had co-owned the interests it has now fully purchased, is now the sole owner and operator of the Barnett Shale's active assets, including 215,000 net developed and undeveloped acres. Total said in a press release that production from the acquired assets is about 65,000 barrels of oil equivalent a day; at the end of last year, Total's entire U.S. production stood at 89,000 barrels per day.
Almost any activity in the Barnett Shale would represent an acceleration. Currently, there are only three rigs drilling in the shale play, compared with 202 rigs drilling in the Permian Basin in West Texas, according to The Wall Street Journal. Barnett was abandoned to a greater extent than most other U.S. shale plays following the downturn in commodity prices.
Total spent $800 million on a 25% stake in Barnett Shale in 2009, according to Reuters, plus $1.45 billion toward the fields' development over six years. While it since has scaled back production amid persistently low prices, like many other oil majors, Total saw too much opportunity for relatively little cost in Barnett. Among its advantages were preemption rights in its 2009 deal with Chesapeake, which recently decided to exit the shale play amid fiscal woes, allegations of corruption and the untimely death of former chief executive officer and co-founder Aubrey McClendon earlier this year.
That doesn't end Chesapeake's obligations, though. According to Reuters, the deal requires Chesapeake to pay $334 million to Williams Partners LP (NYSE:WPZ) (Tulsa Oklahoma), a company that gathers and processes 80% of the gas from the Barnett assets, to terminate its gathering agreement.
Among the currently proposed projects that would use product from the Barnett Shale is Midstream Energy Holdings LLC's (Houston, Texas) natural gas storage cavern in Tallulah, Louisiana. The facility, which would be built in an $80 million first phase, a $65 million second phase and a $65 million third phase, would involve leaching a cavern with 8 billion cubic feet per day in each phase, for an eventual total of 24 billion cubic feet per day. Natural gas would be supplied by the Barnett, Haynesville and Fayetteville shales, as well as the Gulf of Mexico, to supply liquefied natural gas (LNG) export terminals on the U.S. Gulf Coast.
The project is still in its planning stage, and the first two phases would not begin construction until mid-2017 at the earliest, while the third phase would not see construction begin until mid-2018. For more information, see Industrial Info's project reports on the first, second and third phases.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Total, which had co-owned the interests it has now fully purchased, is now the sole owner and operator of the Barnett Shale's active assets, including 215,000 net developed and undeveloped acres. Total said in a press release that production from the acquired assets is about 65,000 barrels of oil equivalent a day; at the end of last year, Total's entire U.S. production stood at 89,000 barrels per day.
Almost any activity in the Barnett Shale would represent an acceleration. Currently, there are only three rigs drilling in the shale play, compared with 202 rigs drilling in the Permian Basin in West Texas, according to The Wall Street Journal. Barnett was abandoned to a greater extent than most other U.S. shale plays following the downturn in commodity prices.
Total spent $800 million on a 25% stake in Barnett Shale in 2009, according to Reuters, plus $1.45 billion toward the fields' development over six years. While it since has scaled back production amid persistently low prices, like many other oil majors, Total saw too much opportunity for relatively little cost in Barnett. Among its advantages were preemption rights in its 2009 deal with Chesapeake, which recently decided to exit the shale play amid fiscal woes, allegations of corruption and the untimely death of former chief executive officer and co-founder Aubrey McClendon earlier this year.
That doesn't end Chesapeake's obligations, though. According to Reuters, the deal requires Chesapeake to pay $334 million to Williams Partners LP (NYSE:WPZ) (Tulsa Oklahoma), a company that gathers and processes 80% of the gas from the Barnett assets, to terminate its gathering agreement.
Among the currently proposed projects that would use product from the Barnett Shale is Midstream Energy Holdings LLC's (Houston, Texas) natural gas storage cavern in Tallulah, Louisiana. The facility, which would be built in an $80 million first phase, a $65 million second phase and a $65 million third phase, would involve leaching a cavern with 8 billion cubic feet per day in each phase, for an eventual total of 24 billion cubic feet per day. Natural gas would be supplied by the Barnett, Haynesville and Fayetteville shales, as well as the Gulf of Mexico, to supply liquefied natural gas (LNG) export terminals on the U.S. Gulf Coast.
The project is still in its planning stage, and the first two phases would not begin construction until mid-2017 at the earliest, while the third phase would not see construction begin until mid-2018. For more information, see Industrial Info's project reports on the first, second and third phases.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
