Deepwater drilling remains steeped in hot water as oil continues to spew into the Gulf. U.S. coal supplies are feeling the heat of growing pan-Asian demand that is altering the very structure of the global coal market.
The unavoidable outcome of these paired circumstances is a heightened focus upon onshore oil and natural gas supplies; and in the vast, celebrated North American shales lie untold fortunes in nonrenewable energy. If you thought the race was on a few years ago to tap into these supplies, have a look at the foreign capital that is now entering this market ... turning the jog into more of a sprint.
India's largest publicly traded company, Reliance Industries, signed a $1.36 billion joint venture agreement last week with Pioneer Natural Resources (NYSE: PXD) for a 45% stake in the driller's Eagle Ford shale assets. Atop a $263 million initial cash payment, Reliance will cover more than $1 billion in total drilling costs over the next four years.
According to Pioneer, this will enable at least a 15-fold increase in the company's Eagle Ford production from just 2,000 boepd (barrels of oil-equivalent per day) in 2010 to 32,000 boepd or beyond by 2013. As my Foolish colleague Toby Shute has pointed out, some Pioneer acreage is in a "dry gas window" within the Eagle Ford play, while the more characteristic liquid-heavy acreage has attracted major producers including ConocoPhillips (NYSE: COP) and Chesapeake Energy (NYSE: CHK).
Rather than a mere reminder of the emerging significance of the Eagle Ford, this deal underscores a growing tide of foreign development capital supporting North American shale production more broadly.
- Reliance Industries itself, back in April, inked a $1.7 billion deal with Atlas Energy (Nasdaq: ATLS) for a 40% stake in that driller's operations in the Marcellus shale.
- Encana (NYSE: ECA) revealed last week an intent to form a joint venture with China National Petroleum -- the state-run parent company of PetroChina (NYSE: PTR) -- to develop assets in northeast British Columbia. Encana proudly declared: "Given the depth of our enormous unconventional natural gas resource portfolio, we are accelerating our organic growth rate and targeting a doubling of our production per share over the next five years."
