BP bags unconventional shale gas

BP has executed a letter of intent to buy into a 25% stake in Fayetteville shale gas onshore in a joint venture with US Chesapeake Energy Corporation for US $1.9 Bn.

BP becomes owner of 135,000 acres of the 540,000 net acres of US onshore gas property held by Chesapeake which currently produces 180 MMcf/d of gas. Because of the size of the property, Chesapeake and BP together believe the area could support drilling a further 6,700 horizontal wells to tap the tight gas reserves.

Under the terms of the deal BP will pay US $1.1 Bn at the closure of the deal and a further $800 m this year and next.

Andy Inglis, chief executive of BP’s E&P division said: “Development of these resources, along with our leading position in Coal Bed Methane production, and our extensive tight gas plays throughout North America, will enhance BP’s position as a leader in “unconventional” gas technology and enable growth of our North American onshore natural gas production from today’s level of 470,000 boe/d.”