BG Group joined the growing band of energy companies planning to reduce production of shale gas in North America in response to declining wholesale prices this week.
A decision by the FTSE 100 oil and gas producer to cut the number of rigs it operates in US shale fields from 35 at the end of 2011 to eight in 2012 follows sharp falls in recent weeks in the prices commanded by gas producers using controversial hydraulic fracturing, or fracking, techniques to release the fuel from rock formations.
The rapid expansion of gas derived from fracking in the US is expected to transform the country into a net exporter of gas and also provide a welcome boost to job levels, according to remarks by Barack Obama, US president, in last month’s State of the Union address to Congress.
But a glut of shale gas has prompted BG to follow in the footsteps of US groups Chesapeake Energy and ConocoPhillips along with Norway’s Statoil and Royal Dutch Shell in moderating its short-term enthusiasm for shale gas. Each has indicated its intention to scale back drilling and projected production in North America, although some players remain committed to developing oil-rich shale fields in spite of the current glut in US gas production.
Last month Chesapeake, the second-largest producer in the US, announced a planned 8 per cent cut in gas production and a two-thirds cut in the number of rigs drilling gas wells, in response to what it described as a gas market that was not “oversupplied”, but “under-demanded”.
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