Shale gas boom transforming U.S. industry

Fortune Reversal

There’s been a reversal of fortune for chemical producers after years of decline. Shares of LyondellBasell Industries NV have more than doubled since it emerged from bankruptcy in 2010. It’s now among chemical producers planning billions of dollars of plants around the Gulf of Mexico to gain from cheaper gas. Fertilizer companies including CF Industries Holdings Inc. also are planning to build gas-fueled plants.

Shale oil is the “next energy revolution,” with output accelerating in the U.S. at a rate of about 26% a year since 2004, PricewaterhouseCoopers said in a February report.

“It’s liquids that can really transform the U.S. economy,” Jock O’Callaghan, the energy, utilities and mining leader for PwC Australia, said in an interview yesterday in Sydney, where he attended the Bloomberg summit.

BHP plans to focus on higher-priced liquids in the Eagle Ford region of Texas after buying Petrohawk Energy Corp. for $15.1 billion, including debt, Kerr said. BHP, which also purchased assets from Chesapeake Energy Corp. for $4.75 billion, is spending $4 billion this fiscal year on shale.

“Today, the majority of our drill rigs and our operations are focused toward building out and developing our liquids-based business in shale in the Eagle Ford,” Kerr said. “That continues to be the path that we go down because that’s where we see the highest returns.”

Self Sufficient

The boom in oil and gas production has helped the U.S. cut its reliance on imported fuel. The U.S. produced 84% of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88% in December, the highest since February 1987.

Hydraulic fracturing of shale formations in the U.S. has boosted supplies of gas and sent prices tumbling. The process, in which water, sand and chemicals are injected into shale to release gas, has drawn opposition from environmental groups concerned about tainted water supplies and air pollution.

CEO Kloppers gave up his fiscal 2012 bonus after booking a $2.84 billion charge last August to write down the value of the shale gas assets in the U.S. after prices fell. BHP’s copper unit head Andrew Mackenzie will take over from Kloppers in May.

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