Asian investments may target U.S. shale

Shale becoming an attractive capital target as Asian oil and gas production wanes.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   May 8, 2017 at 6:07 AM
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May 8 (UPI) -- Asian investments in U.S. shale basins are expected to gain traction in a capital strategy to offset domestic declines at home, analysis finds.

A report published Monday from analysis group Wood Mackenzie finds Asian companies geared toward exploration and production, known as the upstream sector of the energy business, are migrating toward North America.

In the three years ending in 2013, more than $20 billion in Asian capital targeted U.S. shale oil, though that investment stream dwindled as the market declined. With Asian players looking to diversify their portfolios, Adrian Pooh, a senior upstream analyst, said U.S. shale is drawing interest again.

"There is a window of opportunity for outside investment into plays such as the Permian," Pooh said. "The key is identifying the many financially stretched tight oil operators looking for capital injections to help realize ambitious growth plans."

A drilling productivity report from the U.S. Energy Information Administration finds the Permian basin in Texas is recovering quickly as oil prices settle in at around $50 per barrel. May output is expected at about 2.4 million barrels per day. For all but three months since January 2016, production from Permian shale has increased.

Wood Mackenzie found Asian oil and gas production, meanwhile is on pace to decline by more than 20 percent over the next decade as many of the reservoirs there start to mature.

Last week, Chinese oil and gas companies said from a technology conference in Houston that Chinese companies may be looking to capitalize on offshore opportunities as well. The head of a division of China National Offshore Oil Corp. said the company was looking to become a world-class player in the offshore market.

For U.S. shale, the analysis from Wood Mackenzie found Asian investors may find a low risk environment, but exposure so far is minimal.

"Output from the tight oil-driven US unconventional plays will grow exponentially over the same period, but their overall portfolio exposure to the theme is under 1 percent," the researcher said.

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