Total enters natural gas business in the US

French oil firm Total has become the most recent oil giant to enter the US non-conventional gas sector after declaring a joint venture with Chesapeake, a US natural gas producer.

Total will get 25 per cent of Chesapeake’s Barnett Shale natural gas portfolio for $800 million, informed the Paris-based company. It has moreover committed to pay an extra $1.45 billion over a period of six years to fund 60 per cent of Chesapeake’s future capital spending on drilling and completion of wells, as stipulated in the joint contract.

Christophe de Margerie, CEO and Chairman of Total, said that the partnership will allow the French company to develop its know-how in hydrocarbons to expand its business worldwide. In a separate statement, Aubrey McClendon, CEO of Chesapeake, commented that the deal would let his company to lessen its future capital expenditures.

The Barnett Shale property has a daily natural gas production of 700 million cubic feet and includes around 300,000 acres of leasehold. Under the contract terms, the daily share of Total from the current production will be 175 million cubic feet, equivalent to 30,000 barrels of oil. The French firm plans to increase its share to more than 250 million of cubic feet in the coming years.

Market analysts welcomed Total’s announcement, which follows similar earlier moves by other key oil firms. An analyst from a French bank said that Total is the last major oil company to enter the non-conventional gas business in the US – long after Shell, BP and ExxonMobil ventured. He further added that Total had no prior experience with such business.

Non-conventional gas is not expensive to produce. Essential reserves had been recently discovered in the US, which promises ample production potential for the future.