StatoilHydro to invest $3.4billion in US gas project

Norwegian energy giant StatoilHydro intends to invest about 3.4 billion dollars (2.65 billion euros) in a shale gas project in the United States, it said in a statement on Tuesday.

StatoilHydro will acquire 32.5 percent of the Marcellus gas project in the Appalachian region of the northeastern US, owned by Chesapeake Energy Corporation, for 1.25 billion dollars. The Norwegian company, the second-largest gas distributor in Europe, will also pay 2.125 billion dollars for drilling and completion of wells during the period 2009-2012.

Before that money is paid out though, "Chesapeake is required to maintain a significant level of drilling activity," StatoilHydro said. Chesapeake is the leading US gas producer.

The Marcellus zone, covering 7,300 square kilometers (2,818 square miles), contains shale gas, or gas that is trapped in rock and which is extracted by injecting water and sand, a costlier method that normal drilling.

The two groups estimated that the zone could support the drilling of 13,500 to 17,000 horizontal wells over the next 20 years with a continuous programme using up to 50 drilling rigs. Each well is estimated to cost approximately 3.5 million dollars.

The deal will enable StatoilHydro to increase its overall reserves by some 2.5 to 3.0 billion barrels of oil equivalent (boe). StatoilHydro's share of Marcellus' production is expected to be at least 50,000 boe per day by 2012 and at least 200,000 boe per day after 2020.

The deal is scheduled to be closed before the end of the year, StatoilHydro said. The StatoilHydro share price was shedding 1.05 percent in mid-morning trading on Tuesday in an overall market down by 2.06 percent.

Author: Jo Amey