BHP to invest $4.5 bn on shale gas assets development in 2012

BHP Billiton, the world's largest mining company, says it will spend $4.5 billion next year and another $50 billion over more than a decade on developing its shale gas assets.

The move comes after the Melbourne-based miner last year acquired US-listed Petrohawk Energy for $12.1 billion.

Speaking yesterday with investors, Michael Yeager, CEO of BHP's petroleum unit, said that production of shale gas is forecast to surge to an average of 1 million barrels of oil equivalent per day by the end of the decade from 250,000 barrels a day this year.

''Shale gas is changing the landscape, this is going to be a game changer for energy supply across the US, and for BHP to not be a part of it we think is irresponsible,'' he said.

After entering the shale gas business this February with the acquisition of shale gas assets from Chesapeake Energy Corp for $4.75 billion, BHP Billiton went on to acquire US gas producer Petrohawk in July, a move aimed at expanding into the booming shale-gas industry.

While the existence of shale gas was known for decades, the technology to extract natural gas from shale became available only recently with the latest hydraulic fracturing techniques and horizontal drilling, which has made all energy majors like Exxon Mobil Chevron, BP, Shell, Reliance Industries and other producers make a beeline for the shale acreages in the US.

Shale gas is expected to account for 50 per cent of the US natural gas production by 2020, while the International Energy Agency has said that a 40 per cent of the increase in global gas production will come from unconventional gas exploration by 2035.

But natural gas prices in the US have hit rock bottom and is now selling at about $S3.55 per thousand cubic feet, compared to $4.27 in July this year, when BHP Billiton announced that it would acquire Petrohawk and $14 per thousand cubic feet in 2005.