Foreign firms invest big in U.S. energy boom

@CNNMoney January 11, 2012: 4:33 PM ET
Nearly $6 billion in  investments in U.S. oil and gas fields by foreign firms could boost U.S. production, but also calls to export natural gas.

Nearly $6 billion in investments in U.S. oil and gas fields by foreign firms could boost U.S. production, but also calls to export natural gas.

NEW YORK (CNNMoney) -- Foreign firms, hungry to cash in on the American energy boom, have invested nearly $6 billion in U.S. gas and oil drilling in the last few weeks.

Energy giants from China, France and Spain have snapped up stakes in fields in Ohio, Mississippi, Colorado and Michigan.

These investments will likely add to the recent boom in U.S. natural gas production, pushing already low natural gas prices even lower.

Low domestic prices could drive natural gas producers to seek out European and Asian markets, according to analysts, where the fuel commands three or four times the price.

"Of course that will" lead to more exports, said Nansen Saleri, president of the oil field consulting firm Quantum Reservoir Impact. "And it will be a tremendous opportunity."

Many experts do indeed see increased exports as a big plus, creating jobs, reducing the trade deficit and adding to the tax base. But not everyone is so sanguine.

Can a cleaner environment create jobs?

Exporting more natural gas, which is is used to heat half the homes in America, would mean higher prices for U.S. consumers.

And some U.S. industries would also suffer.

"I am worried that exporting America's natural gas would raise energy costs for American consumers, reduce the global competitiveness of U.S. businesses, make us more dependent on foreign sources of energy," Massachusetts Congressman Ed Markey, a Democrat, wrote in a letter to Energy Secretary Steven Chu earlier this month.

There are strict rules governing the export of oil and gas from the United States, and the government must approve of any project.

The Department of Energy is currently reviewing eight applications to build natural gas export terminals. That's an about-face from five years ago, when industry plans called for importing natural gas.

The push to export gas would be happening regardless of the new foreign investment.

Last week Chinese oil giant Sinopec (SHI) invested $2.2 billion in the U.S. firm Devon (DVN, Fortune 500) that gives Sinopec a one-third stake in oil and gas fields Devon is developing in Louisiana, Mississippi, Ohio, Colorado and Michigan.

And the French company Total (TOT) recently paid $2.3 billion to U.S. oil and gas firm Chesapeake for a minority stake in some Chesapeake (CHK, Fortune 500) fields, mostly in Ohio, while Spain's Repsol paid $1 billion for a minority share in fields being developed by Oklahoma-based Sand Hill Energy.

The U.S. natural gas boom is being driven by the advent of new drilling technology and the increased use of hydraulic fracturing -- a controversial method known as fracking that cracks rock formations and has raised concerns over ground water pollution.

It's this new drilling and fracking technology that the foreign firms are interested in. There's oil and gas in shale and other types of rock worldwide, and these firms are after the means to tap it.

EPA sounds alarm on fracking in Wyoming

"This new technology was invented in the United Sates," said Clark Sackschewsky, a partner in the consultancy BDO's natural resources group. "These foreign companies are coming in and saying 'we've got the money, we want to learn from you.'"

Kevin Book, head of research at ClearView Energy Partners, acknowledges that rising natural gas prices may hurt U.S. manufacturers and others that are currently benefiting from low prices. But, he says, selling oil, gas and refined products overseas brings more dollars into the U.S.

Even so, these these foreign firms are likely to tread lightly, especially in an election year.

Less than a decade ago, Congress interfered with a bid by Chinese oil firm CNOOC to buy California's Unocal, which was ultimately sold to Chevron (CVX, Fortune 500).

"Chinese investments appear more motivated by knowledge acquisition for now," Robert Johnston, director or energy and natural resources at Eurasia Group, wrote in a recent research note.

They are "unlikely to attempt shipping gas back to the home market if they sense that the political climate is unfavorable."  To top of page

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