The rocketing costs of oil and gas shales, which in one case has shot up 10-fold in five weeks, is raising concern of a bubble, according to Bloomberg.
Bloomberg said that, “Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc.”
Japanese commodity trader Marubeni agreed to pay up to $25,000 an acre for a stake in Hunt Oil’s Eagle Ford shale property, located in Texas. “The price, which includes future drilling costs, exceeds the $21,000 an acre Marathon Oil Corp. paid last year for nearby prospects owned by KKR & Co.’s Hilcorp Resources Holdings LP. In the Utica shale of Ohio and Pennsylvania, deal prices jumped 10-fold in five weeks to almost $15,000 an acre, according to IHS figures.”
