The shale plays of the U.S. are playing a bigger role day by day in the world oil and natural gas market. The advent of new technologies has not only opened up new avenues of growth for the country, but has also compelled oil and natural gas companies to shift their focus on the U.S. shale plays. The recent sale of Clyden oil sands leasehold by ConocoPhillips (NYSE:COP) is a perfect example of this trend.
ConocoPhillips (NYSE:COP) has declared that it has reached a deal to sell 226,000 acres of undeveloped land in Clyden, near the southern edge of the Athabasca oil sands. ConocoPhillips holds roughly 1.1 million net acres of land in the Athabasca. The area is touted to contain 16 billion barrels equivalent of crude, making ConocoPhillips (NYSE:COP) one of the major players of the area. Exxon Mobil Corporation (NYSE:XOM) will have a stake of 72.5% of the total sold area while the rest will be held by Imperial Oil Limited (USA) (NYSEAMEX:IMO).
The investment in Clyden oil sands is Exxon Mobil Corporation (NYSE:XOM)’s second in Canada within a year. Exxon has already invested about $3.1 billion in October in securing oil sands acreage from Canadian oil and gas producer Celtic Exploration. The company, facing a decline in production in conventional oil fields, has been expanding its presence in oil sands and other unconventional oil plays. As Canada is expected to double its oil production by 2030, acreage in the country fits perfectly into Exxon’s strategic goal of warding off declining production.
Imperial Oil Limited (USA) (NYSEAMEX:IMO) is also gearing up to increase its production in the oil sand area of Canada. The current acquisition fits perfectly into Imperial’s growth strategy in the oil sands, where it has already started production in its Kearl project in Alberta, which is scheduled to produce 110,000 barrels a day by the end of the year. The company reported a profit of $327 million in the second quarter of 2013 compared with $635 million for the same period in 2012.
But a dearth of presence of pipelines to connect the crude oil produced to the refineries has acted as a barrier in the growth of oil production from the area. This justifies ConocoPhillips (NYSE:COP)’s shedding of assets in the area to concentrate on the shale plays in the U.S.
Conoco’s strategic fit
The shale plays in the U.S. present great opportunities for the oil and natural gas companies operating in the country. Since 2005, after the net import of oil reached its peak, there has been a gradual decrease of net oil import in the U.S. with increasing domestic output. According to EIA, the U.S. is the largest consumer of petroleum products, consuming 18.6 million barrels per day during 2012. Out of the total consumption, 40% is imported and the share is expected to decline in the coming years due to the increasing production from the shale plays.