Has Apache Drilled The Best Shale Gas Reservoir?
Anirban is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
One discovery eclipses the other and this is what has kept the oil and natural gas companies growing over the years. Their constant urge to find new and better sources of energy has been the key factor for the companies that have excelled in this field. And in one such drive, Apache (NYSE: APA) might have discovered one of the world’s largest shale gas producing acreage.
The Discovery
Apache has discovered the shale gas play in the Liard Basin in British Columbia in a fully owned acreage of 430,000 acres and expected to hold 48 trillion cubic feet (Tcf) of recoverable natural gas. Apache drilled three wells in the area with only one being drilled using the latest multiple stage hydraulic fracturing process, which produced in its first thirty days of operation 21.3 million cubic feet of gas everyday and is being labeled by Apache as the most productive shale gas well ever drilled.
The Prospect
The advent of new technology has resulted in a boom in the production of natural gas in the US, especially from shale gas fields. This led to many companies running to produce more and more natural gas from shale plays. But soon supply was far more than the demand for natural gas in the US and the price of natural gas plummeted. Though it was a setback for the natural gas producing companies, a new opportunity surfaced- to export LNG to the European and especially the Asian markets where LNG prices are in multiples to that of the US markets on the backdrop of high demand from countries like Japan, South Korea, China and India.
Cheniere (NYSEMKT: LNG) is already converting its import facility into an export one, while Shell (NYSE: RDS-A) has received a license in the west coast of Canada, and others like Chevron (NYSE: CVX) a strengthening its hold in the Australian LNG production to tap this lucrative Asian market. Apache is also not far behind and is planning to build a LNG export terminal at Kitimat, in the northern coast of British Columbia. This will help the firm to export LNG from US to the LNG hungry countries of Asia, though the export facility will not become operational before 2017 and the Liard basin field will be a big source of natural gas for the facility.
The Bottom Line
Whether Apache goes for production now or at a later date is a different issue, but the potential that the Liard Basin play provides to Apache is nonetheless huge. The acreage provides export potential for many years and once operational will reap huge benefits for the company. Don’t take your eyes off the stock.
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