BHP Billiton aims to be major player in shale gas market after acquisitions

BHP Billiton spent nearly $17bn buying shale gas producer Petrohawk Energy and shale gas assets from Chesapeake Energy earlier this year.

Michael Yeager, BHP petroleum chief executive, said yesterday: “This is going to be a gamechanger around the world and for BHP Billiton not to be part of it would be irresponsible.”

BHP said it plans to spend around $5.5bn a year by 2015, about a billion more than previous estimates, and around $6.5bn a year in 2020 on US shale.

BHP’s move this year into the relatively new and contentious energy source has worried some investors, particularly with US gas prices depressed by the growing supply of gas from shale.

Chief executive Marius Kloppers, however, has played down the concern, saying the group takes a “multi-decade view on price”.

Mr Yeager said BHP expects to benefit from an increase in US demand for gas, particularly as US efforts to cut greenhouse gas emissions push more buyers to switch from coal to gas.

US gas prices are expected to rise to over $6 per million British thermal units (mmBtu) by 2020, up from around $4 per mmBtu currently, he said.

Evy Hambro, investment chief for natural resources at BlackRock, BHP’s top shareholder, recently told Reuters he was “reserving judgement” on the Petrohawk deal ahead of yesterday’s briefing, and also expressed general concern over the cheap price of US gas and the potential for environmental issues.

Landowners in Arkansas and other shale gas producing areas have raised concern about the technique used to drill for shale gas, hydraulic fracturing or ‘fracking’, but BHP has said the technology is safe.

“The technology used here has been proven and used for a long, long time,” Mr Yeager said of the fracking technique, adding that the shale gas industry is tightly regulated and even smaller players are unlikely to take short- cuts.