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6 August 2012 | Adam Leach
The world’s largest mining company has downgraded the value of one of its shale gas assets by $2.84 billion (£1.82 billion), citing an oversupply of the fuel on the world market.
In a statement released on Friday, BHP Billiton said it still believes that shale gas will play an increasingly important part in the fuel source mix, but due to a “short-term oversupply of gas” it was devaluing its Fayetteville plant.
The write-down puts the current value of the plant, which it purchased from Chesapeake Energy in February 2011 for $4.74 billion (£3.03 billion), at less than half the purchase price.
Marius Kloppers, CEO at the Australian-based organisation – who is foregoing his bonus as a result of the decision to make the acquisition – said in the statement: “The Fayetteville charge reflects the fall in US domestic gas prices and the company’s decision to adjust its development plans by shifting drilling from dry gas to the more liquid-rich fields. While we have responded appropriately to the changed market conditions, today’s impairment is clearly disappointing.”
The company said that its other shale gas assets, acquired when it purchased Petrohawk Energy Corporation in August last year, are not affected by the write-down and will create "long term shareholder value".
In a further blow, the company has also been forced to write-down the value of its Nickel West mine by $450 million (£287.9 million) due to its profit margin on the metal tightening.