Has the natural gas boom been too big for producers?
A gas and oil refinery is seen in an aerial view.
Royal Dutch Shell is going to sell its stake in the Eagle Ford Shale formation; 106,000 acres on top of oil and natural gas reserves. It’s a story that sounds a lot like a country-music song.
You’ve got a southern gem (the Eagle Ford Shale) which catches the eye of an international big-spender (Shell). And then Shell decides the Eagle Ford formation just isn’t worth the time.
Bye, bye South Texas.
But before you pull out your Kleenex, you should know there are other suitors for Eagle Ford’s oil and gas reserves.
Thomas Tunstall, research director for the Institute for Economic Development at the University of Texas at San Antonio, says independent companies have an edge. Those smaller companies are the ones who figured out how to get the oil and gas out of the shale, says Tunstall, “the larger oil companies are still learning about them. They don’t know as much about these production techniques as these independents do.”
And there are other reasons Shell’s backing out. Phil Flynn, with the PRICE Futures Group in Chicago, says Shell was late to the shale gas boom. As the price of natural gas has dropped, it’s been hard for the company to make big money. “For Shell at this point, it’s small potatoes for them, and they want to focus on their core business,” says Flynn.
So the company is out.
But, David Goldwyn, from Goldwyn Global Strategies doesn’t think the shale gas boom “is in any danger of becoming a bust.” Right now, he says, demand just isn’t there for a company like Shell to stick with the investment.
Even if it’s hard to walk away.