WSJ: Exxon Lured By Gas Potential


Exxon Mobil Corp. has joined a growing list of major energy companies looking to exploit an emerging source of natural gas once seen mainly as the bane of coal miners.

The world's largest publicly traded company by market capitalization has acquired about two million acres of coalbed-methane resources in Germany, its first foray into the exploration of gas trapped in coal seams in Europe.

For centuries, coalbed methane was a safety hazard for coal miners, causing explosions and deaths from asphyxiation. Now, the prospects for traditional fossil-fuel reserves are diminishing, intensifying the majors' hunt for new, unconventional resources world-wide, including coalbed methane. Coalbed methane already accounts for about 10% of the natural gas produced in the U.S., where independent producers -- which, unlike oil majors, don't have refining operations -- have been at the forefront of coalbed-methane production and technology development. Smaller companies also have been exploiting the methane in Europe, Japan and Australia.

Now, large, international energy companies are rapidly adding coalbed methane and other unconventional natural-gas resources, such as shale and tight gas, which are harder and more expensive to extract than conventional gas, because these resources usually have a longer lifespan than normal gas reservoirs.

Major oil companies are also trying to be the first to export the expertise and technology developed in recent years in North America to international markets.

"From Exxon's standpoint, whether the gas reserves would come from the U.S. or Europe makes no difference," said Paul Cheng, analyst at Barclays Capital. "They just need all the resources available."

After successfully producing coalbed methane in the U.S., ConocoPhillips formed in 2008 a $5.9 billion joint venture with Australia's Origin Energy Ltd. to develop its coal-seam gas assets. Along with Chevron Corp., Conoco also recently locked in coalbed-methane exploration rights in China.

But Exxon Mobil's new coalbed-methane acreage in Lower Saxony and North Rhine-Westphalia in Germany marks the first attempt of a U.S. major oil company to unlock such resources in Europe, where demand for gas is expected to grow vigorously just as countries intensify their efforts to reduce their dependence on Russia as a supplier.

"There is an attractive gas market in Europe," said David Rosenthal, Exxon Mobil's vice president of investor relations.

In recent years, Europe has made up for its maturing natural-gas fields by tapping pipelines from Russia and Norway, and is also now looking to the Middle East and North Africa. But a series of spats between Russia and Ukraine that curtailed gas flow to Europe has reinvigorated the search for more secure sources of the fuel.

Exxon Mobil's coalbed-methane interest in Germany complements its existing shale positions in the Lower Saxony Basin. The Irving, Texas, company also has tight-gas interest in Hungary and shale-gas acreage in Poland.

Exxon Mobil -- which said it plans to start drilling for CBM in Germany next year -- and its rivals are also hoping that Europe's unique need for new local supplies will help their investments on the continent hold up better than in the U.S., where a boom in gas output has contributed to a glut that recently sent prices plunging.

Copyright (c) 2009 Dow Jones & Company, Inc.


Our Privacy Pledge

Most Popular Articles

From the Career Center
Jobs that may interest you
Drilling Supervisor - Land
Expertise: Company Man|Drilling Consultant|Drilling Foreman / Drilling Supervisor
Location: Opportunities Throughout the Lower 48
Completions Supervisor
Expertise: Company Man|WellSite Supervisor|Workover or Completion
Location: Richmond, TX
Field Engineer-Wireline
Expertise: Drilling Foreman / Drilling Supervisor|Perforation
Location: Odessa, TX
search for more jobs

Brent Crude Oil : $50.47/BBL 0.98%
Light Crude Oil : $49.72/BBL 1.09%
Natural Gas : $2.76/MMBtu 1.09%
Updated in last 24 hours