“Shale is becoming the realm of Big Oil,” said Rob West, a partner at Redburn, an independent financial analysis firm. Mr. West forecasts that the proportion of major oil companies’ output from shale will double by 2025, an increase from about 10 percent of their production now.
Part of the attractiveness of investments in shale is the quick payoff. Drilling in shale rock leads to oil extraction much faster than traditional large, and complex, oil and gas investments, which have longer time frames. That helps reduce a project’s exposure to fluctuations in the price of oil.
Those rapid turnarounds are of greater interest to large energy companies, whose boards are increasingly hesitant to approve long-term oil and gas projects. Fearful of declining demand for their products as renewable energy sources like wind and solar become more prevalent, energy executives have been keen to lock in short-term returns on their investments.
“The short-term return, which is the story of shale, is building its way into the board room,” Andrew F. Gould, a former chief executive of Schlumberger, the oil services giant, said at a conference in Vienna last month.
On a call with reporters after the BHP deal was announced, BP executives said that the acquisition offered the chance to scale up their shale investments with modest risk.
“These are discovered resources in the ground,” said Bernard Looney, BP’s upstream chief executive. “We know they are there.”
Uncertainty about the future, and a desire for quick returns on investment, have also driven companies like BP to make deals in areas like solar and wind power, and even for small electric utilities. Total, for instance, recently purchased a utility called Direct Energie for $1.7 billion, while BP struck a $200 million deal for a solar power developer called Lightsource at the end of last year.
While these investments remain relatively small in proportion to the companies’ overall spending, analysts say they also offer a quicker payback than oil and gas projects as well as a hedge against an uncertain future for fossil fuels.
