Cnooc to buy stake in US shale oil and gas project

Financial Times:

Cnooc has agreed to pay just over $1bn for a stake in a large shale oil and gas project in Texas in the first step by the state-owned Chinese energy company into the onshore US market since its failed bid for Unocal, an exploration and production company, in 2005.

In a deal that underscores China’s appetite for “unconventional” resources, Cnooc is to buy 33 per cent of Chesapeake Energy’s Eagle Ford shale acreage in Texas for $1.08bn.

It also has agreed to pay 75 per cent of the US company’s drilling and well completion costs, up to a further $1.08bn. Chesapeake will retain operational control.

The deal marks a return for Cnooc to the US after its $18.5bn attempt to acquire Unocal was abandoned in the face of intense opposition from US politicians. Chinese oil companies have subsequently been cautious about investment in US resources.

Cnooc is joining a number of international groups that have bought into US “unconventional” resources: oil and gas that have traditionally been uneconomic to produce.

Its acquisition was the second Eagle Ford deal announced on Monday, with Statoil of Norway and Talisman Energy of Canada joining in a $1.3bn deal to buy assets in the area.

New techniques have cut the cost of extracting gas, and increasingly oil, from rocks such as shale, leading to a rise in US production and a boom in dealmaking. Companies spent a record $21bn on shale gas acquisitions in the first half of 2010, according to Wood Mackenzie, the consultancy.