A proposed liquefied natural gas (LNG) project in Alaska may cost as much as $65 billion, according to a consortium of energy companies. This staggering figure provides investors with yet another reminder about the rising cost of global oil and gas development.

Investopedia Broker Guide: Enhance your trading with the tools from today's top online brokers

Alaska LNG
The North Slope of Alaska contains trillions of cubic feet of stranded natural gas and various proposals have been offered to get these resources to market, including the construction of a LNG export facility. The estimated cost would range between $45 billion and $65 billion. This includes the construction of an 800-mile pipeline and other infrastructure needed to process and bring natural gas to the southern coast of Alaska.

The estimate was prepared by Exxon Mobil (NYSE:XOM), Conoco Phillips (NYSE:COP), BP (NYSE:BP) and TransCanada Corp. (NYSE:TRP) at the request of Sean Parnell, the governor of Alaska.

SEE: Commodities: Natural Gas

Acquisitions/Joint Venture
Penn Virginia
(NYSE:PVA) increased its leasehold position in the onshore United States, adding about 4,100 net acres prospective for Eagle Ford Shale in Texas. The acquisition cost the company $10 million and will boost its total position here to 30,000 net acres.

Shale and unconventional resource plays in the U.S. are expensive to develop and the industry is constantly looking for partners to share the cost of this development. Carrizo Oil & Gas (Nasdaq:CRZO) announced a joint venture agreement with OIL India Ltd. and Indian Oil Corporation Ltd. on its Niobrara position. The company will sell a 30% share for $82.5 million, with 50% in cash and the balance as a drilling carry to cover future development costs. Carrizo Oil & Gas will add a second operated rig here in 2013 and expects the drilling carry to be utilized by early 2014.

SEE: How Shale Fracking May Hurt Your Investment

Exploration
Marathon Oil
(NYSE:MRO) is involved with oil and gas exploration in frontier areas and has acquired a 20% interest in the South Omo concession in Ethiopia. The concession area is 7.2 million gross acres and is operated by Tullow Oil. The company plans an exploration well here in the fourth quarter of 2012.

The industry also sees exploration potential in Uruguay, with Total (NYSE:TOT), BP and two other operators awarded interests in eight offshore blocks. The companies agreed to invest $1.65 billion over the next three years, with first drilling expected in mid-2013.

SEE: Unearth Profits In Oil Exploration and Production

Bye Bye
Conoco Phillips is not as optimistic about exploration prospects in Peru. The company has ended its exploration efforts on two blocks in the Maranon Basin. The company has a 45% interest in these blocks and finished two seismic surveys of the properties. Conoco Phillips said that the decision was part of its strategic plan to rationalize its asset portfolio.

Conoco Phillips is also looking to sell the company's share of the Kashagan oil field in Kazakhstan. The large project has been under development for years and production is expected to begin in early 2013. The company has an 8.4% interest in the North Caspian Operating Company (NCOC), which is responsible for the project.

The Bottom Line
Many observers have noted the increased cost of oil and gas exploration and development as the industry works on a resource base that is less accessible than in previous generations. This was driven home last week with the shocking $65 billion cost of a proposed project in Alaska that will liquefy natural gas for export to Asia.

At the time of writing, Eric Fox did not own any shares in the companies mentioned.

Related Articles
  1. Economics

    Who Wins With Low Energy Prices? 

    Low oil prices are here to stay for some time. Which economies will benefit or lose from the low oil price regime?
  2. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  3. Savings

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  4. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  5. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  6. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  9. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  10. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!