The shale resources in Texas appear very appealing as an investment opportunity to many foreign individuals. And the situation is made even better by the fact that there are fewer risks involved. In the past few years, many foreign companies have tried to capitalize on shale resources and spent billions of dollars in the process. They have either acquired other companies or formed joint ventures with all those people who have succeeded in perfecting their extraction, refinement and hydraulic fracturing processes.
Just this year, a Chinese company formed a joint venture with a reputed natural oil firm. The venture is valued at $1.7 billion. In the initial days, when foreign organizations first became a player in the game, they were interested in buying companies. This was the time when the shale oil industry was going through an upsurge. Later on, they changed their goal slightly because it better suited their needs.
Instead of buying companies priced at billions of dollars, all foreign entities started participating in joint ventures. If they had stuck to their previous plan, they would have put a lot of liabilities on themselves. But with this new plan, they could still be involved in shale resources and focus on that, while having to spend lesser amounts. Another benefit was the fact that they also did not have to go through any issues that came with taking ownership of a firm.
The financial experts in the industry believe that this trend is going to go to a change very soon. In the last few months, these companies have not taken part in this business in their usual ways. They have not bought many stocks, but are more interested in private equity deals now. With this approach, their position is not going to be anything major, but their presence would still be there. And they can achieve all this by not spending anything more than a few million dollars.
The new situation is actually quite good for all foreign investors. They can enjoy valuable deals, and expose themselves to a limited risk level.
Most of the foreign investors who are seeking private equity deals are based in Australia and Korea. The US interests them because the shale resources here seem to be more promising than their own homelands, and so can provide them with better returns.
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