Statoil Seeking Shale Oil Opportunities in Australia, China

Statoil ASA (STL), Norway’s largest oil and gas producer, is searching for a second shale partner in Australia following a deal with Canada’s PetroFrontier Corp. (PFC) and is also considering acquisitions of explorers.

“We are actively looking for new opportunities in Australia,” Atle Rettedal, Statoil’s senior vice president for new ventures, said in an interview in the Northern Territory capital of Darwin, where he attended an industry conference. Statoil also is interested in shale opportunities in countries including Argentina and China, Rettedal said.

Statoil, ConocoPhillips (COP), Hess Corp., BG Group Plc (BG/) and Mitsubishi Corp. (8058) have agreed to fund shale exploration campaigns through partnerships in Australia. Statoil in June agreed to invest as much as $200 million in a drilling program in the Northern Territory’s Southern Georgina Basin with PetroFrontier.

Stavanger, Norway-based Statoil is expanding internationally and into so-called unconventional resources as output from aging fields off its home country’s coast declines. The company, which operates about 80 percent of Norway’s oil and gas production, plans to boost output to at least 2.5 million barrels of oil equivalent a day in 2020 from about 2 million barrels currently.

“If we make another move in Australia, it should happen in the coming year,” Rettedal said yesterday. “This is the window of opportunity. It’s not something that will happen five years from now. It’s happening now.”

Shale Risk

The company spent $4.4 billion acquiring Brigham Exploration Co. in December to enter the Bakken and Three Forks shale areas in the U.S. Also in the U.S., Statoil bought assets in the Marcellus formation in 2008 and formed a venture with Talisman Energy Inc. (TLM) in the Eagle Ford formation in 2010.

Making shale oil and gas investments in stages is preferable, though purchasing a company in Australia is a possibility as well, Rettedal said.

“It’s perfectly feasible that we could do that,” Rettedal said, referring to acquisitions. “When it comes to shale exploration, we have a preference for doing it stepwise because there is a risk. You are making a qualified bet.”

Global energy companies such as Statoil are trying to tap what Australia’s government estimates is almost 400 trillion cubic feet of potential shale gas resources. Santos Ltd. (STO), Beach Energy Ltd. (BPT), Senex Energy Ltd. (SXY) and AWE Ltd. (AWE) are among Australian explorers holding shale acreage.

Obstacles to Production

Australian shale explorers may be a decade away from producing oil and gas on a large scale because of obstacles ranging from a lack of drilling equipment to higher labor and infrastructure costs, Wood Mackenzie Ltd. said in May.

“Large-scale shale production in Australia, that will take time,” said Rettedal, who cited access to infrastructure in the country’s remote fields as one of the main challenges for the industry. “You might be right if you said 10 years.”

Statoil agreed to acquire as much as 65 percent of PetroFrontier’s interests in four existing exploration blocks, plus two pending permits. The venture may drill as many as 20 wells by 2017 in three phases, according to the company.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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