BHP Billiton said Dec. 12 that it has signed a definitive agreement with PetroChina International Investment (Australia) Pty Ltd to sell its 8.33% interest in the East Browse Joint Venture and 20% interest in the West Browse Joint Venture, located offshore Western Australia, for a cash consideration of US$1.63 billion.
More than a century and a half after its discovery, oil continues to play an essential role in the global economy, despite fears that reliance on petroleum is fueling rapid climate change. Over the last decade, the price of oil has taken a roller coaster ride, usually in a cyclical pattern that is in sync with the global economy. A strong economy tends to increase the demand for oil and drive up the price, while a weak economy generally has the opposite effect.
Indeed, lower prices already have slowed new drilling for natural gas, causing jobs and investment to shrink in some communities. But energy companies have shifted their spending to shale wells that will provide oil, leading to rapid growth elsewhere. Even if gas prices stay low, overall employment is expected to continue rising, says John Larson, an economist with IHS Consulting.
Government officials are highlighting rising energy production as a bright spot in a still fragile economy. During his State of the Union speech, President Barack Obama said, “The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper.” He cited an industry study finding that development of shale gas will create more than 100,000 jobs by the end of the decade. For every new job working in the oil and gas sector, another four are supported by the energy supply chain and by workers spending more money on goods and services, says Timothy Considine, an independent economist who has worked on estimating job creation in the natural resources sector.
Even state officials in New York, which has blocked shale-gas development until an environmental review is completed, say the economic boost would be considerable. “There is potentially a very significant economic upside,” says Joe Martens, the state’s environmental commissioner. “There’s an enormous job impact.”
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“This is probably the biggest stimulus we have going,” says Michael Lynch, president of Strategic Energy & Economic Research, a consultant based in Amherst, Mass. Some $145 billion will be spent drilling and completing U.S. wells this year, up from $13 billion in 2000, estimates Spears & Associates Inc., an oil-field market research firm.
Though the energy boom looks like a road to prosperity, it may be a bumpy one. Drilling is disrupting communities in ways that are still unfolding, creating concerns about the costs to local governments for things like road damage. It is also raising fears about potential water contamination, air pollution and even earthquakes from the effects of drilling thousands of new deep wells.
Skeptics warn that individual shale communities could experience an employment boom, followed by a painful bust. Rosy economic models “tell us nothing about what will happen when drilling ends,” warns a May 2011 paper published by Cornell University’s City and Regional Planning Department and funded in part by a foundation opposed to shale drilling.
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