China backs shale revolution ($5.4B Encana investment shows importance of ‘unconventional’ gas)

National Journal ^ | 02/11/2011 | Peter Foster

[SeekAndFind]

Encana’s announcement on Wednesday of a proposed $5.4-billion investment by PetroChina in its shale gas operations confirms the soaring importance of a resource that 10 years ago was hardly on the commercial map.

It also looks like a nice piece of timing, since it came before Encana’s revelation Thursday that slumping natural gas prices had continued to hit earnings in the fourth quarter, although this was hardly unexpected.

The market liked the news of the Chinese investment much more than it disliked the earnings dip, and Encana shares put on 4.5% to close at $32.02. PetroChina shares, by contrast, fell on the news, since the Chinese company’s purchase price embeds a significant premium to current depressed North American gas prices. One key issue is how long those prices are likely to stay down. Given the huge supply potential of shale gas, that could be quite a while. The commitment certainly seems to confirm China’s long-term orientation, because it comes at a time when the North American market is awash with gas, Canadian gas exports to the U.S. continue to slump, and there is no other place for natural gas currently to go.

PetroChina’s investment is undoubtedly being made with an eye to the planned $3.5-billion project to ship LNG out of Kitimat and link Canadian gas to Asian markets. As such it should be welcome to Ottawa. There is little reason to see why the federal government would raise any objections to the deal.

Nevertheless, Kitimat will continue to attract opposition from environmentalists, who are also making hay with concerns about the pollution potential of shale gas. If they really were concerned about reducing carbon dioxide emissions, they might welcome a surge in natural gas supply and usage, given that it has half the emissions of coal.

[junta]

Shale gas companies extract shareholder value and transfer it to the drilling companies. Not unheard of in the patch just that the latest and greatest hype is from the likes of Chesapeak and others.

[epithermal]

TORONTO (Dow Jones)--PetroChina Co.'s (PTR) planned C$5.4 billion deal to acquire a 50% stake in Encana Corp.'s (ECA) Cutbank Ridge natural gas reserves in Western Canada will be reviewed by Industry Canada to determine if the proposed transaction generates a net economic benefit for Canada. "I can confirm that this transaction is subject to review under the Investment Canada Act," Industry Canada Minister Tony Clement said in an e-mailed statement. The deal can't proceed unless the government decides the transaction passes the Investment Canada Act's net economic benefit test. PetroChina plans to file its application soon, Clement said. Clement's announcement may come as a surprise to some market participants who believed the transaction wouldn't be subject to review because PetroChina is only buying a stake in an energy project as opposed to acquiring EnCana outright. Chinese companies have employed this strategy in Canada specifically to avoid scruntiny under the Investment Canada Act.

[Army Air Corps]

Ping.

[MinorityRepublican]

Shale gas is profitable at $70 per barrel, right? If so, we’re way over that since past couple of years and we need to invest in shale gas in USA. Oh and build dozens of nuclear plants while we’re at it.

[thackney]

Shale gas is profitable at $70 per barrel

Natural Gas serves different markets than crude oil. Long term trends will tend to follow but the price per BTU is greatly different. Crude price is not a good indicator of Natural Gas price except when you look very long term (multi-year averaging).