OREANDA-NEWS. SK E&S announced that its affiliated company DewBlaine Energy, LLC, which was established in North America in September 2014, signed a USD 360 million contract to acquire 49.9% stakes of local gas field owned by Continental Resources, Inc. (hereafter Continental).

SK E&S announced that the payment terms for the acquisition of the stakes is that SK E&S will pay USD 90 million in cash at the time of contract and the remaining amount will be paid by investing the half of the exploration cost of Continental. As a result, SK E&S will pay 75% of annual exploration cost by the time of the balance payment completion (USD 270 million).

The two companies will invest together and cooperate through the whole process of field exploration and production. Continental will be in charge of the field operation.

This Woodford Shale is located in southeastern Oklahoma and holds approximately 76 million tons of natural gas. Its size reaches about 182 §ґ (approximately 55.1 million Pyung).

Through this contract, SK E&S secured 38 million tons of gas among total 76 million tons of gas reserve, which equals to the total annual import of natural gas (almost 39 million tons) in 2013.

The two companies agreed to focus on drilling for the next three years and begin the production starting 2017. They will increase the production by 2.4 million tons per year in 2019. The share of SK E&S is 1.2 million tons per year.

In regard with this contract, SK E&S said, "The biggest result is that we were able to secure hedging capability that can compensate the future price increase of the natural gas through this contract. Based on the partnership with Continental of which production and management capability is well known for, we will gradually increase the influence in North America."

In particular, the significance of this contract lies in that the US, an energy importing country, has transformed into an energy exporting country and SK E&S was able to win this contract in time when mega energy companies from various countries are fiercely competing against each other in order to acquire more shale gas interests.

Through this, SK E&S was able to secure exploration and development capability which is the core of upstream of the LNG value chain. An official of SK E&S said, "Through this investment, SK E&S became the LNG provider which has a shale gas field."

The company explained that this outcome is resulted from the concentration of all SK group's capability, based on Chairman Chey Tae-won's 'No Resource Oil Production Country' project.

Chairman Chey Tae-won emphasized that energy reserves are the core of future national competitiveness and the biggest mission of the energy company is to secure energy resources and their development. He actively promoted resource development since 2004 and continuously executed research and investment by designating overseas resource development as one axis of the group growth drives.

Continental, which will jointly develop the field with SK E&S, is a mega energy company that produces 170,000 BPD (as of February 2014) in the Bakken located in North Dakota and Montana, and the Woodford located in Oklahoma. It is listed on the New York Stock Exchange and its market cap reaches USD 21.1 billion.

The Bakken and the Woodford are considered as the prospective shale reserves in the United States, including the Eagle Ford (Texas), the Haynesville (Louisiana/Texas), and Marcellus (Pennsylvania).

Harold G. Hamm, Chairman of Continental, said, "It is a pleasure to be a partner with a global energy leader SK and a great honor to be selected as the first partner of SK's North America shale gas business."

Meanwhile, through so called 'Shale Gas Revolution', the US became the largest natural gas producing country surpassing Russia in 2009. Therefore, the industry is expecting that the US will lead the change of the global energy market starting the first half of 2016 when it becomes the natural gas exporting country.

According to EIA, shale gas reserves in the US reaches 665tcf (trillion cubic feet), which is the fourth largest country following China (1,115tcf), Argentina (802tcf), and Algeria (707tcf). However, the US produces 91% of global shale gas production. In regard with shale gas exploration technology, drilling capability, and economic feasibility, the US has a big lead over other countries.