US gas company Chesapeake Energy is to sell a third of its interest in the Eagle Ford Shale project to China’s CNOOC for $1.08 billion.
Chesapeake will continue to manage the project in South Texas, conducting all leasing, drilling, operation and marketing activities.
CNOOC will fund 75 per cent of Chesapeake's share of drilling and other costs until an additional $1.08 billion has been paid, which Chesapeake expects to happen by the end of 2012.
Oklahoma City-based Chesapeake is currently operating 10 rigs in the 600,000-acre Eagle Ford leasehold, but with the additional capital from CNOOC, it hopes to increase drilling to approximately 12 operated rigs by the end of 2010 and approximately 40 rigs by the end of 2012. About 900 wells are expected to be drilled by the end of 2012.
Chesapeake anticipates the project will reach a peak production of 400,000 to 500,000 barrels of oil equivalent per day within the next decade.
Commenting on the deal, Aubrey K. McClendon, Chesapeake's chief executive officer, said: "This transaction will provide the capital necessary to accelerate drilling of this large domestic oil and natural gas resource, resulting in a reduction of our country's oil imports over time, the creation of thousands of high-paying jobs in the US and in the payment of very significant local, state and federal taxes.
“In addition, Chesapeake's embedded safety culture and integrated environmental protection strategies will be adopted to safeguard personnel and the surface and subsurface environment.”
Over the next few decades, the companies plan to produce around four billion barrels of oil from the project. Eagle Ford is estimated to have reserves equalling more than 80 billion barrels. The formation is about 50 miles wide and 400 miles long, extending from Texas’s southern border to the east.
CNOOC, which is China’s third-largest oil company, has spent at least $3.1 billion on overseas acquisitions this year as the nation’s energy demand grows rapidly.
Chesapeake is the second-largest producer of natural gas and the most active driller of new wells in the US. The company owns leading positions in the Barnett, Fayetteville, Haynesville, Marcellus and Bossier natural gas shale plays and in the Eagle Ford, Granite Wash and various other unconventional liquids plays.
