Right from day one in 2012 we see the continuing importance of  international M+A activity in shale development.  The implications in France of the Total investment in the Utica being seen as a disinvestment in a France will become clearer over time.  France is making the accidental choice between austerity and shale.  Nothing will be solved in France this side of May's presidential elections but solved it will be. The shale ban will come up against reality and the choice will be clear:  No shale = No prosperity. Guess what happens?  

This snippet from Aubrey McClendon ,who is one of the few people who can combine shooting his mouth off and making sense at the same time.

 We believe that the Utica Shale is a world-class asset with world-class returns and now we have a world-class partner to help develop the play more aggressively than we could have with our own resources.

The other deal du jour were more in a string of Chinese investments in North American shale:

Chinese oil firm Sinopec has agreed a $2.2bn (£1.4bn) deal with Devon Energy, giving it access to shale deposits in the US.

Sinopec will get a one-third stake in five new shale projects, with the firms expecting to drill 125 wells this year.

This is notable in that Devon don't need the money to pay down debt in the way that CHK do. This deal seems to be the latest in one where oil majors, and that includes the US ones as well, are investing in shale as technology plays. But that is a pretty old story, reaching all the way back to 2009 when we saw Statoil invest in CHK along with US shale investments by Shell, BP and ENI.

Shale technology will inevitably become more widespread. There isn't yet a generic one size fits all shale method that works everywhere, as people like 3 Legs and BNK are learnng in Poland. Geology is so diverse and complex that there won't be. But the learning experience stage will mature and the next stage will be looking for producing assets.

North American producing assets are lower risk but expensive. There are any number of high risk projects worldwide that are insanely cheap. One could easily invest a small amount of money in companies who don't know what they are sitting on or who have little money - and lose it all. Or to invest now and make massive returns.

What would be interesting is to see a worldwide expansion of the North American wildcatter tradition. Right now we have people looking for sure things - and forgetting the one sure thing is that there are no sure things.  

But here is one sure thing: Smart money will risk small (<$100M) money to have potential for very serious money.Total for example bought the Utica at about $15K per acre. You can easily get acreage in Europe for hundreds. Maybe it is years away from production but the Utica is not exactly gushing at this exact instant.  

Once we see some firm figures coming out of Poland and the UK, the European market will take off.  But that is when things well be in the billions instead of tens of millions.That is when the returns will be in the low single figures instead of double figure multiples.Buy now, hold on to production and either actually discover something (billions) or simply sell it on in a year or two when market sentiment values shale properties realistically based on the success of others.Remember the best ride is the free ride. If we see big discoveries in Europe it will lift all boats. Fall for the peak oil it will never work in Europe stuff and you may as well open a laundromat or leave the money in the post office.Unfortunately what we have in Europe is risk averse small minds making small money. But who says that European money is the avenue for European shale investment? Plenty of other people in the world with money.

So much for the upside. But even the downside isn't so bad. Finding a semi-plausible prospect is easy enough, the trick is to find one in an interesting market. As in most things, shale plays in Europe will find that location, location, location makes up for a lot of geologic uncertainty. North America is littered with shale plays today in places where expert geologists could not have given away interest five to ten years ago. Almost any shale play in Europe will eventually produce something for someone. The downside risk is that after a few years the worst case is to make one's money back. At 1% interest rates that isn't the worst outcome in the world. The upside is the creation of new European billionaires.


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