Back in February, I predicted that Asian energy companies would steal the spotlight from their European counterparts this year in the ongoing amazing shale race. That's pretty much what's happened as the year has progressed. The particulars have diverged a bit, though, so let's have a look.
I tapped Korea's national oil company, KNOC, as a likely participant. It turned out to be KNOC compatriot Korea Gas Corp. (Kogas) that has stepped up to the shale plate. Kogas is the world's largest importer of liquefied natural gas, so, duh. The firm cut a deal with Canadian gas giant Encana
Another firm I highlighted as a likely shale gas entrant was India's ONGC. Again, I got the country right, but picked the wrong powerhouse.
Reliance Industries, India's largest company, has turned out to be far more active on the shale front. As I noted in a July article focused on Encana's growth spurt, Reliance arranged joint ventures with both Pioneer Natural Resources
This would be a great score for Chesapeake, but what's good for the firm may not be great for the North American natural gas industry as a whole. Every time a deep-pocketed investor steps in to fund one of these massive shale plays, the amount of gas supply that's impervious to short-term price declines increases. A key mechanism keeping production growth in check when prices decline is thus kept from functioning. That greatly hurts the marginal producer.
Fortunately, there are gas-focused E&Ps out there that are profitable at today's depressed prices. You'd best stick with them.
