BG Group to make £1bn investment in shale gas tie-up deal with EXCO

Steve Dinneen
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BG Group will pay $950m (£637m) for a 50 per cent interest in Appalachian shale gas assets from EXCO Resources.

The firm will gain access to a total of a total of 654,000 net acres in the Appalachian Basin
BG will pay $800m in cash and a further $150 towards EXCOs drilling costs to take advantage of the 35m standard cubic feet per day of natural gas the site produces.

Altogether, it will increase its estimated net gas resources by 2.4 trillion standard cubic feet.

The deal is the latest in a string of shale gas tie-ups between the two firms. BG and EXCO will establish a 50-50 joint venture (JV) company to operate the upstream assets and a separate JV to invest in gathering and transportation. Both new firms will be based in Pittsburgh.

BG chief executive Frank Chapman said: “This transaction provides critical mass to BG’s US upstream gas business, with total resources estimated at more than seven trillion standard cubic feet, equivalent to more than 1.2bn barrels of oil equivalent.”

Production of gas from shale reservoirs, which are tight and display low permeability, has exploded in recent years. Although this has weighed on gas prices, companies including BG hope strong future energy demand, especially for fuels which emit less CO2 than coal or oil will ensure good profit margins in the future.