Wood Group Sees Growth Potential in Shale

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WOOD Group has highlighted the appeal of unconventional oil and gas markets such as shale after winning more business in the USA.

The Aberdeen-based firm said managing services in unconventional oil and gas basins presents a significant growth opportunity for the company. Spending on new offshore projects in areas such as the North Sea has been under pressure amid the plunge in the crude price since June last year.

Wood noted the progress it has made onshore in the US after winning a $31 million contract to manage a coal bed methane development in in Wyoming mining country.

The company said the win made it one of the biggest players in coal bed methane in the Powder River Basin. The area provides about 40 per cent of America’s coal and is a focus of activity in the emerging industry focused on extracting gas held within deposits.

The US Geological Survey has highlighted the potential to produce vast amounts of gas from the country’s coal beds. The body has also noted that increased coal bed methane production carries with it environmental and technological difficulties and costs. Methane is a greenhouse gas which is extracted from coalbeds using large volumes of water.

But Wood Group noted it has been active in the coalbed methane sector for 12 years.

John Glithero, president Americas of the Wood Group PSN division, said: “The management of services in unconventional oil and gas basins, including the coalbed methane market, presents a significant growth opportunity for us.”

Wood Group has expanded rapidly in the controversial shale market in the USA through acquisitions.

The Wood Group PSN division acquired the Elkhorn and Mitchell’s operations in deals thought to be worth more than £200m in total during the long period of high oil prices that ended in June last year.

This encouraged strong investment in shale assets in the US.

In its interim results announcement in August Wood Group noted its US onshore business had been hit by the fall in spending on new wells seen in the wake of the crude price fall, which reflects abundant supplies of oil and muted demand. Sector watchers believe Saudi Arabia has been prepared to live with the price fall in the belief it will drive US shale producers out of the market.

However Wood noted that spending on maintaining existing onshore assets has been less affected.

Wood Group has said it shed 3,000 jobs in the US in the first half of the year, without detailing how many were onshore posts. It cut 1,000 jobs in the UK.

Wood Group PSN focuses on maintaining existing assets. The division was led until recently by Robin Watson, who will succeed Bob Keiller as group chief executive after he retires from the firm on 31 December.

Critics claim the hydraulic fracturing, or fracking, used on shale fields poses risks to the environment. Fracking involves pumping sand, water and chemicals into rocks under pressure to release oil and gas.

Mr Keiller has said Wood Group would support companies in the shale market in the UK if society decided they should be able to frack.

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