Gulf closed, Shell points to shale

May 28, 2010

While Royal Dutch Shell could well have been working on its $4.7 billion cash deal to buy privately held East Resources before the BP blowout on April 20, the deal could become a beacon for others looking trying to figure out how to expand away from sucking crude through deepwater rigs and towards natural gas and solid land.

The deal raise Shell’s daily gas production in North America by about 7.5 percent and give it access to a swathe of the Marcellus Shale (pictured left), the northeastern U.S. rock formation that is a crucial source of future U.S. gas production.

Shale gas accounts for between 15 percent and 20 percent of U.S. gas production, but is expected to quadruple in coming years, touching off a scramble among producers large and small for access to resources.

Analysts said the deal would put pressure on Shell’s balance sheet, which is already stressed with other projects. If that’s true, and Shell saw a need to move quickly, perhaps environmentalists worried about what shale projects mean to the land will have another thing to blame on BP’s disaster in the gulf.

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