From Bloomberg comes the above video report on the heavy losses being experienced by US shale gas producers as oversupply hits profits following a spending spree to expand the industry.
According to the report, companies have spent $US460 billion on shale gas investment, which has led to a massive oversupply and pushed natural gas prices down by 25% over the past three years.
Accordingly, energy companies are bleeding, with Shell forced to write down the value of its North American assets by $US2.1 billion last quarter and expects its exploration unit to remain unprofitable until at least next year, whereas BHP Billiton has written down its Arkansas shale asset by $US2.8 billion.
Production levels on shale gas wells also typically top-out in around four years requiring further investment to keep the gas flowing at the same rate.
The implication for Australian LNG is ambiguous. On the one hand, the drop in profitably could lead to lower overall US shale gas supplies, resulting in less gas being exported. On the other hand, it could also increase pressure to export LNG, where prices and potential profits are higher than available domestically.
Something to watch.
