Shell Buys Gas Group East Resources for $4.7 Billion

East Resources is a privately-owned business with its primary activity focused on the Marcellus shale rocks in the northeastern United States.

Royal Dutch Shell announced on May 28 that it had agreed to pay $4.7 billion in cash for most assets owned by natural gas explorer East Resources.

East Resources is a privately-owned business with its primary activity focused on the Marcellus shale rocks in the northeastern United States.

Technology to extract natural gas from shale, or sedimentary rock, has improved dramatically in recent years, leading companies into regions where resources were thought to be spent, such as New York state.

The methods use hydraulic fracturing to break up deep underground rock, jetting high-pressure liquid containing chemical products deep into the ground, releasing the gas and bringing it to the surface.

Shell chief executive officer Peter Voser said that the purchase was an opportunity to enhance the Anglo-Dutch group's growth through exploration and focused acquisitions, and through divestment of non-core operations.

"East Resources' management have built an excellent organization, with high quality assets in the Marcellus, which we are pleased to have as our centerpiece as we enter the premier shale gas play in the northeast U.S.," he added.

"This deal is further evidence of the robust market in the U.S. for proven shale plays," said David Hart, energy market analyst at broker Westhouse Securities.

Shell said East Resources produces 10,000 barrels oil equivalent per day, predominantly in natural gas, and has "substantial medium-term growth potential."

In 2000, shale gas represented only 1% of U.S. output. Today it accounts for 20% and could surpass 50% by 2030, according to a recent study by research firm IHS CERA.

Copyright Agence France-Presse, 2010

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