BHP expects U.S. shale gas production to quadruple by 2020

BHP Billiton Ltd. (BHP), Australia’s biggest oil and gas producer, expects output from its U.S. shale assets to quadruple by 2020, driven by the $12.1 billion purchase of Petrohawk Energy Corp.

Production of natural gas and liquids trapped in shale rock is forecast to surge to an average of 1 million barrels of oil equivalent per day by the end of the decade from 250,000 barrels a day this year, J. Michael Yeager, chief executive officer of BHP’s petroleum unit, said on a call with investors today.

“Shale gas is changing the landscape,” Yeager said. “This is going to be a game changer for energy supply across the United States, and for BHP to not be a part of it we think is irresponsible.”

BHP entered the shale gas industry this year with its acquisition of Petrohawk Energy and the $4.75 billion purchase of assets from Chesapeake Energy Corp. Shale may account for almost 50 percent of total U.S. gas production by 2020, the Melbourne-based company said in a presentation today.

The company is betting that gas prices in the U.S., which are less than quarter of those paid by Japanese importers, will rise as producers export liquefied natural gas, Yeager said.

Japan, the world’s biggest buyer of liquefied natural gas, paid about $14.90 per million British thermal units for its LNG supplies in September, data from the country’s Ministry of Finance showed today. Prices at Henry Hub, the U.S. benchmark, were at $3.527 per MMBtu.

‘Prices Will Rise’

“The market expects gas prices will rise over time,” Yeager said.

The mining and energy company expects its petroleum production to surge by 41 percent to 225 million barrels of oil equivalent in the year ending June 2012 from 159.4 million barrels last year, BHP said today.

The company’s oil and gas unit expects an annual growth rate of at least 10 percent for the rest of the decade, and spending on U.S. shale to rise to about $6.5 billion in the financial year ending June 2020 from around $4.5 billion this year, BHP said.

The Petrohawk acquisition makes BHP the seventh-biggest independent oil and gas company by resources, the company said today. The petroleum producer committed earlier this year to spend $80 billion on growth projects by 2015.

Chief Executive Officer Marius Kloppers has had three deals totaling more than $100 billion aborted or rejected over the past four years, including hostile bids for Rio Tinto Group and Potash Corp. of Saskatchewan Inc.

BHP, also the world’s largest mining company, would consider expansion in LNG, Kloppers said in August. BHP, a partner in Woodside Petroleum Ltd.’s proposed Browse LNG venture in Western Australia, aims to have “many tools in the toolkit,” he said.

BHP’s oil and gas sales climbed 22 percent to $10.74 billion in the year that ended June 30.