Tuesday, February 16, 2010

Another Marcellus Shale Player

By Jonathan Soble in Tokyo
Published: February 16 2010 13:11 | Last updated: February 16 2010 13:11
Mitsui & Co, the Japanese trading and investment group, has agreed a $1.4bn deal with Anadarko Petroleum to buy a minority stake in the US group’s Marcellus Shale natural gas project in Pennsylvania.
The deal, announced on Tuesday, will give Mitsui control of 32.5 per cent of Anadarko’s shale-gas assets in the state, where most of the 250,000 sq km Marcellus deposit is located.
The Japanese company said it planned to spend an additional $3bn-$4bn on exploration and extraction, making Marcellus one of its largest energy investments. It said it was counting on rising demand in the US for natural gas as an alternative to coal and oil.
The deal could bolster confidence in the future of shale gas and other “unconventional” natural-gas sources. Shale gas is found hundreds of metres below ground inside densely packed rock and extracting it on a commercial scale has become possible only in the past few years.
Shale-gas explorers such as Anadarko, which is based in Texas, use advanced techniques such as horizontal drilling and “fracturing” gas-encasing rock with a mix of sand and water pumped into wells at high pressure.
Analysts say exploiting shale gas beds could more than quadruple the world’s useable natural gas reserves. Shale-gas development has been confined mostly to North America so far, but Mitsui said it hoped the Marcellus deal would lead to future projects in China, where large shale-gas deposits have also been found.
Like other Japanese trading houses such as Mitsubishi and Marubeni, Mitsui has expanded from its original import-export business to become a major financial backer of commodities and energy projects. It owns a Y250bn ($2.78bn) interest in Russia’s Sakhalin-2 liquefied natural gas project, its biggest such investment so far.
Mitsui said it expected the Marcellus development to last 60 years and produce 360m to 460m cu ft of gas a day at its peak. Most of the $3bn-$4bn in additional development costs would be spent in the fist ten years or so to drill “a few thousand wells”. It said it planned to close the deal on March 15.

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