Shell raises natural gas stake with S. Texas lease
Royal Dutch Shell has quietly expanded its position in an emerging natural gas field in South Texas as part of a broader bid to become a bigger player in the North American gas business in coming years, the company's top U.S. executive said Friday.
The company recently leased 150,000 acres in an area generally referred to as the Eagle Ford shale play south of San Antonio, said Marvin Odum, president of Houston-based Shell Oil Co., the U.S. arm of the European oil giant. He declined to disclose the seller or the amount of the investment.
He now considers the holdings a key piece of a North American gas portfolio the company has spent the last two years building, and that now encompasses 2.4 million acres of land and a resource holding of 21 trillion cubic feet of natural gas 8 trillion cubic feet of which was added in 2009 alone.
It's time for Shell to step out and show what we've done in that area, Odum told the Chronicle in an interview Friday on the sidelines of Eco-marathon, a Shell-sponsored student competition downtown showcasing energy-efficient vehicles.
Oil companies are bulking up on natural gas amid stricter environmental laws and forecasts that use of the cleaner-burning fuel will grow in coming years. In North America, they've also been spurred by breakthroughs in drilling technology that have unlocked huge natural gas discoveries in recent years in dense shales and other unconventional rock formations.
By 2035, shale gas could account for half of the U.S. natural gas supply, up from 20 percent today and 1 percent as recently as 2000, according to a report this month from IHS Cambridge Energy Research Associates, which also predicts the fuel could supply more than 100 years of U.S. gas needs.
The Eagle Ford, which starts near the Mexican border and extends east below San Antonio across a string of counties, is considered one of the hottest unconventional gas prospects in North America. It not only contains what are thought to be huge amounts of natural gas but also higher-value crude oil and natural gas liquids.
While exploration there is in earlier stages than other large U.S. shale plays like North Texas' Barnett, Louisiana's Haynesville and Arkansas' Fayetteville, major producers are increasingly moving in to Eagle Ford, alongside smaller energy ventures that helped pave the way.
Earlier this month, London-based BP made a deal with privately held Lewis Energy Group that gives it a 50 percent stake in 80,000 acres of Eagle Ford. Houston's ConocoPhillips has 300,000 acres there, while France's Total entered a joint venture in January with Oklahoma City-based Chesapeake Energy that could set up its entry into the Eagle Ford play.
Odum said Shell's unconventional gas portfolio is dynamic and could grow or shrink as it zeroes in on the most productive regions. Even with what it already has, Shell could be spending almost double the $2.2 billion it shelled out in 2009 on North American drilling, he said.
A 2007 partnership with Calgary-based Encana gave Shell access to Louisiana's Haynesville shale, while a nearly $6 billion deal the following year to acquire Duvernay Oil Corp. provided entry into gas fields in Alberta and British Columbia. Shell also has a position in the U.S. Rockies.
On another subject of concern in Houston, Odum said Shell's recently announced plan to eliminate 2,000 additional jobs by the end of 2011 after cutting 5,000 globally in 2009 should have a very, very small impact on Shell's 13,000 area employees.
ADI Price at posting:
28.5¢ Sentiment: Buy Disclosure: Held
