Bloomberg News

BHP Sees World Lagging U.S. in Shale for Foreseeable Future (2)

March 04, 2014

BHP Billiton Ltd. (BHP), the world’s biggest mining company, sees international development of shale-gas resources continuing to trail the production boom in the U.S. in part because of a lack of infrastructure.

“The shale-gas revolution is unlikely to go global quickly,” Andrew Mackenzie, chief executive officer of the Melbourne-based company, said at the IHS CERAWeek energy conference in Houston today. “We are unlikely to see gas replace coal globally at the scale and pace seen here in the U.S.”

Hydraulic fracturing and horizontal drilling have unlocked deposits of oil and natural gas across the U.S., and drilling efficiency has helped boost rig yields to record volumes from the Permian in Texas to North Dakota’s Bakken play. The U.S. met 86 percent of its energy needs in the first 11 months of 2013, the highest level since 1986, data from the Energy Information Administration show.

Mackenzie, who said in an August interview he intended for BHP to be “one of the leaders in the shale gas and oil business,” took over as CEO after the company spent $20 billion on U.S. shale assets in 2011. BHP was forced to write down the value of shale assets a year later, prompting former CEO Marius Kloppers to waive his annual bonus.

BHP holds more than 1.5 million acres in the Eagle Ford Shale and the Permian in Texas, the Haynesville Shale of Louisiana and the Fayetteville Shale of Arkansas, according to a Dec. 10 presentation.

World Reserves

The U.S. holds the world’s second-largest amount of recoverable shale oil and the fourth-largest of shale gas, according to the EIA. Russia, China and Argentina are also rich in shale oil. China, Argentina and Algeria have the largest technically recoverable shale-gas resources.

About 20 countries are working on some form of shale exploration or development, Tim Probert, strategic adviser to Halliburton Co. (HAL:US)’s CEO, said in an interview at the conference.

“The development of international shales has proceeded at a slower rate than many have thought,” Probert said.

It’s more likely that other countries will develop their shale assets to the scale of a single U.S. basin, such as the Bakken Shale, rather than reach the size of the U.S. shale gas industry in total, said Probert, whose company is the world’s second-largest provider of oilfield services.

Too many unknown factors make it “impossible to forecast” when the rest of the world will catch up to U.S. shale development, Mackenzie said in an interview after his presentation.

“You don’t have anything like the complex gathering and distribution systems” that exist in the U.S, he said. “It’s kind of tough to think how you could transport that to a part of the world which has not had a gas industry before.”

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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