COLUMN-U.S. shale mania costs latecomers dear: Kemp

Tue Aug 6, 2013 6:11am EDT
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By John Kemp

LONDON Aug 6 (Reuters) - Shale sceptics have seized on big writedowns in the value of shale gas and oil properties in North America to question whether the fracking revolution could be running into trouble.

On Aug. 1, Shell became the latest in a long line of oil and gas companies to reveal a multi-billion-dollar writedown in acreage value.

It announced just over $2 billion in impairments "predominantly related to liquids-rich shale properties in North America, reflecting the latest insights from exploration and appraisal drilling results and production information".

Others to acknowledge impairments of their U.S. shale assets have included BG Group and BHP Billiton.

"Over the past few years, the oil majors have been punch drunk on U.S. shale. Now comes the hangover," Guy Chazan wrote in the Financial Times on Aug. 1. "Shale writedown is bad news for U.S. shale," he warned.

Analysts at Bernstein Research, which has long sought to inject a note of scepticism and realism into the debate about shale's potential, expressed caution over "exploration and drilling results that are clearly weaker than Shell had expected (shale oil bulls take note!)"

However, writedowns by Shell and some other majors are a sign they came to the shale boom late in the day, overpaying for lower-quality and less well-explored assets - not that the shale revolution is stuttering.   Continued...