Eagle Ford shale: $28 billion for capital expenditures

Almost $30 billion in capital expenditures will be made in the Eagle Ford shale next year, accounting for more than one of every four dollars in capital expenditures spent for oil exploration onshore in the United States outside of Alaska, according to a new analysis by Wood Mackenzie.

“It’s phenomenal,” said Callan McMahon, upstream research analyst for the research and consulting firm.

EOG Resources, BHP Billiton and ConocoPhillips are the three largest players in the shale, with a combined value of $30 billion in the Eagle Ford, McMahon said.

The Eagle Ford play is so hot that the Wood Mackenzie analysis predicts between 2012 and 2015, capital expenditures there will surpass projected expenditures in the Kashagan project in Kazakhstan, which has been considered the world’s most expensive standalone energy project.

Wood Mackenzie said the latest figures show the Kashagan project will require a total capital investment of $116 billion. The Kashagan project is an offshore project involving a group of oil companies. The first production is expected next year.

The Wood Mackenzie analysis predicts capital expenditures in the Eagle Ford will reach $28 billion in 2013, with the growth centered around Gonzales, Karnes and DeWitt counties.

“Definitely, it’s the spot to be,” McMahon said. “We see that with activity being very heavily concentrated in that area.”

More than 50 percent of daily liquids production in the shale comes from those three counties, according to the Wood Mackenzie analysis.

The Eagle Ford is a “tri-phase play,” McMahon said, ranging from dry gas to thicker oil, with the most profitable area yielding light oil.

Few operators are drilling for dry gas now, with some people opting to let leases go rather than drilling at today’s unprofitable prices, he said.

EOG, BHP Billiton and ConocoPhillips were among the early players in the Eagle Ford.

Wood Mackenzie estimates that the Eagle Ford now represents 38 percent of EOG’s upstream value, while it accounts for about 20 percent of BHP’s upstream portfolio. BHP entered the Eagle Ford by buying Petrohawk Energy Corp. for $12.1 billion in 2011.

All three companies have delineated their positions, and McMahon said it’s now difficult for other companies to get large, continuous parcels in prime locations.

“Anything you could obtain would be fairly pricey,” he said. “The operators are going to keep their positions and drive it for themselves to keep value for their companies.