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Exxon sees gas potential in XTO deal

Sarah Gardner Dec 14, 2009

Exxon sees gas potential in XTO deal

Sarah Gardner Dec 14, 2009


Kai Ryssdal: We’ll get to our coverage of the UN climate conference in just a bit. But there was merger news today that plays directly into the debate over what to do about global warming. The country’s largest oil company made a big bet on natural gas today. ExxonMobil is going to spend $41 billion for XTO Energy. It’s a big player in the ever-expanding market for natural gas. This is one of the biggest corporate takeovers of the year.

And Sarah Gardner reports from the Marketplace Sustainability Desk, it is also a sign of a shift away from oil and coal.

SARAH GARDNER: This is Exxon’s biggest corporate deal since it merged with Mobil in 1999. XTO owns natural gas fields all over the United States. They tap what’s known as “unconventional” gas reserves, including gas in beds of shale rock.

Raoul LeBlanc at PFC Energy says that business is booming in the U.S. right now.

RAOUL LEBLANC: The companies that have been pursuing unconventional gas have been posting growth rates that make all the super majors green with envy.

Super majors like Exxon, whose oil reserves and production growth have been shrinking. XTO, on the other hand, boosted production 23 percent last quarter. New technology now allows companies to tap into vast U.S. natural gas reserves that were once inaccessible.

Energy expert Phillip Verlager says Exxon sees huge potential for natural gas here, especially since it burns cleaner than other fossil fuels.

PHILLIP VERLAGER: Exxon clearly sees an advantage for natural gas over oil and coal given the current environment to limit emissions. Whether we pass a bill through Congress or whether EPA limits emissions, it is going to be more expensive to burn other fossil fuels, and this will give Exxon an advantage.

Verlager says Exxon also sees one other advantage in this deal.

VERLAGER: Owning resources in the United States is a much safer bet.

Compared to say, Iraq, where this past weekend Exxon declined to bid in the latest auction of Iraqi oil licenses.

I’m Sarah Gardner for Marketplace.

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