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July 21, 2008

OPEC and Russia's greed have awakened North America's Gas & Oil Giants - and BP is tacking on

Analysis of: Continental Shift: BP Is Latest Gas Player | royaldutchshellplc.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
Hans Linhardt, PresidentHans Linhardt
President, LTDI, Inc.
Implications: WSJ reported a significant continental shift of oil & gas developments and BP is trying to catch up in view of their forthcoming loss of TNK-BP control. BP is going to invest $1.75 billion in Chesapeake Energy, one of the most successful wildcatters for unconventional natural gas in the Haynesville field in north west Louisiana and extending into north east Texas  (we published on 7/7/08 "Chesapeake Bay, Plains set to tap gas fields" on GLGNews).

Analysis: The US major oil & gas companies are returning to the North American Continent including the OCS territory, because:

•  their expertise and investment opportunities have ben boxed in by greedy and unreliable foreign state governments like Russia, Venezuela and Nigeria

•  today the majors have only access to 13% of global reserves vs. 85% in 1970

•  North America, and in the particular the US has larger unconvential gas and oil reserves than anybody else in the world

•  the leading US major oil companies have the technology to develop the unconvential gas fields within two to five years

•  unconvential natural ("NG") gas fields - as defied as tightly packed sands, coal beds and dense rocks called shales - indeed exhibit 100s of trillions of natural gas reserves 

•  while NG is available near term, oil shale will take some more fine tuning and large scale developments to prove the economics of:

     -  mining 
     -  electrical heating (Shell)
     -  microwave extraction (Raytheon / Schlumberger)

The following major projects are of interest:

•  Exxon is drilling in Colorado and neighboring states for unconventional gas and oil reserves, as well as in Hungary and Germany (geopolitical stable partners)

•  Conoco Phillips acquired earlier Burlington Resources, Inc. for $55 billion

•  Shell with Canadian Encan invested   in the Haynesville NG reserve and acquired Duvernay Oil Corp. in Canada for about $ 6 billion

•  and many more plays are in action for gas and oil in the US and Canada

It is noteworthy that the NA oil & gas investors do not ask for government subsidies like the misguided Al Gore scenario of 100% renewable energy within ten years.  The latter is  unrealistic and does not have the economics of scale and is naive, if not just uninformed.

The dramatic shift of our major oil companies back to their roots promises defeat of OPEC and their conspiring friends, having no advanced technologies of their own but buying US proprietary technology via service companies like Halliburton and Schlumberger.  It is time Shell acquires Schlumberger and Exxon Halliburton.

In the overall picture, consolidations have to happen to drive the NA oil & gas success.  Shell should save BP and Exxon should take Chevron under their wings.

  

    




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