Business

BHP Billiton enters shale gas in Chesapeake asset deal

  • 22 February 2011
  • From the section Business
BHP trucks
Image caption BHP Billiton is the world's largest mining company

Anglo-Australian miner BHP Billiton has agreed to buy shale gas assets from US firm Chesapeake Energy for $4.75bn (£2.9bn).

The purchase of Chesapeake's stake in a field in Fayetteville, Arkansas represents a move into the rapidly expanding shale gas business for BHP.

The field currently produces more than 400m cubic feet (11m cubic meters) of natural gas per day.

BHP says it will fund the acquisition from cash resources.

"This transaction marks BHP Billiton's entry into the US shale gas business. The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer," said BHP Billiton chief executive J. Michael Yeager in a statement.

New technology

The extraction of gas from shale rock is seen as an area of great potential by energy firms, and BHP Billiton is not the first major company to invest in shale gas.

Recently, Chinese state-controlled energy firm PetroChina paid $5.4bn for a 50% stake in a shale gas project, called Cutbank Ridge, run by Encana in Canada.

This followed on from its $1.7bn purchase of a 60% stake in two projects owned by Athabasca Oil Sands in 2009.

It was previously uneconomic to extract such gas from shale fields, but innovations in technology have enabled companies to access gas deposits in a more cost effective way.

Higher energy prices have also spurred greater interest in alternatives to oil and seen energy firms attempting to tap into natural gas deposits.

However, the exploration of shale fields for energy is a controversial subject for some.

Environmental groups have blamed shale extraction techniques for poisoning water supplies, destroying natural landscapes and taking investment away from renewable technologies.

The energy industry denies that the extraction of shale gas is unsafe.

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