(Reuters) - French oil group Total SA (TOTF.PA) is plowing $2.3 billion into the development of U.S. shale gas reserves in Ohio in the latest example of global energy companies piling into burgeoning new energy sources.

In a deal with Chesapeake Energy Corp (CHK.N), which the U.S. group announced in November without identifying its partners, Total will take a 25 percent stake in a joint venture covering the Utica Shale area of eastern Ohio.

North America has seen a boom in investment in energy resources such as shale gas in recent years, raising the prospect of the United States reducing its dependence on imported energy. But the process used to access these resources -- commonly known as fracking -- has become controversial because of environmental concerns.

Under the terms of the deal, Total paid $610 million to Chesapeake and $290 million to a U.S.-based group called EnerVest, the other partner in the venture. Chesapeake will receive another $1.42 billion contribution to drilling and well-completion costs, expected by the end of 2014, it said.

"This is consistent with our strategy to develop positions in unconventional plays with large potential and, in this case, with value predominantly linked to (the) oil price," said Total Exploration and Production President Yves-Louis Darricarrere.

Total, which previously had a joint venture with Chesapeake in the Barnett Shale area in Texas, has said it is looking to boost its position in U.S. shale basins that have crude oil or natural gas with a high liquids content, making them more valuable than dry gas.

Contents of the latest joint venture were disclosed in November, but at the time Chesapeake, the second-biggest U.S. producer of natural gas, did not reveal the identity of its partners.

Oil and natural gas can now be extracted from shale by drilling miles-deep wells and injecting thousands of gallons of water as well as chemicals to flush out natural gas deposits trapped between layers of rock.

Chesapeake is an aggressive buyer of land in the new U.S. shale formations, believed to hold massive reserves of natural gas and oil. But its appetite for new property has left the company too debt-laden to pay for drilling and forced it to attract joint venture partners to help fund development costs.

PROMISING RESULTS

Thin profitability, due to low U.S. gas prices, has not diminished foreigners' enthusiasm for the controversial energy resource.

Devon Energy (DVN.N) said on Tuesday that China's Sinopec (0386.HK) will pay $2.2 billion in exchange for a third of Devon's holdings in five different shale gas regions in the United States.

Statoil (STL.OL) last October paid $4.4 billion for Brigham Exploration BEXP.O to boost its unconventional energy resources in the United States, one of its key growth areas, while India's Reliance (RELI.NS) is also looking to invest more in the U.S. shale gas industry.

The latest venture with Total covers about 619,000 net acres, of which 77,000 were contributed by Houston-based EnerVest, Chesapeake said.

"We believe the Utica acreage is a good asset for Total," analysts at brokerage Bernstein wrote in a research note. "We continue to believe that long-term unconventional assets such as shale oil and gas acreage can deliver stable production and increasingly positive cashflows, given that we expect the oil price to remain high in the long term."

At brokerage CA Cheuvreux, analyst Dominique Patry wrote: "There is no production to date but 13 wells have been drilled across the acreage with very promising results seen from each well in terms of productivity and liquid content."

Concerns about water table pollution, tremors and gas leakage are slowing the expansion of shale gas, but with the biggest oil and gas reserve holders limiting foreign investment in their energy sectors, the big Western oil and gas companies are increasingly focusing on OECD countries such as the United States and Australia.

Yet the technique remains controversial.

The French government in October cancelled three shale gas exploration permits, including one that was granted to Total, after it banned the use of the drilling technique, called hydraulic fracturing.

Shares in Total, which also has shale gas exploration permits in Poland, Denmark and Argentina, were little changed, down 0.3 percent at 39.885 euros by midday. Chesapeake's shares rose 82 cents, or 3.7 percent, to $23.13 in early New York Stock Exchange trading.

Jefferies advised Chesapeake in the transaction. Total declined to disclose its advisers.

(Reporting By Michael Erman; Editing by David Holmes and Maureen Bavdek)

Betting Heavily on Natural Gas Prices

by David Fessler, Investment U Senior Analyst
Tuesday, November 15, 2011: Issue #1643

Most natural gas drillers have been scrambling to reposition their drill rigs over oil-rich acreage… And why not?

With oil once again hovering near the $100-a-barrel mark, you can hardly blame them.

But Monday’s news from BHP Billiton Limited (NYSE: BHP) contradicts that notion.

Billiton announced that it plans to spend somewhere around $4.5 billion on shale gas development. That’s not a typo. Perhaps even more amazing is that’s just what it’s going to spend next year.

That’s an enormous amount of money compared to what some other natural gas companies are spending. Many of them have repositioned their rigs and their business plans around drilling for shale oil.

But the real message Billiton is telegraphing is far more exciting than the $4.5 billion it’s planning on spending next year.

The Long-Term View on Gas

What do they know that all the other companies don’t?

Nothing, of course…

It’s just that Billiton is taking a long-term view on natural gas. They’ve developed and are executing a business plan that will pay off for decades to come.

Billiton is betting the price of natural gas here in the United States will rise more than 50 percent in less than 10 years. It also feels the LNG export opportunities here are too good to pass up.

To quote BHP Petroleum’s CEO Michael Yeager, “This [shale gas] is going to be a game-changer around the world, and for BHP Billiton not to be a part of it would be irresponsible.”

His quote was part of an investor presentation he’s giving to allay shareholder fears about the company’s foray into shale gas.

Going All In

And what a foray it’s been. In just the last year, BHP made two acquisitions totaling $17 billion. In return for its investment, it swallowed natural gas producer Petrohawk Energy, and some prime acreage from Chesapeake Energy Corporation (NYSE: CHK).

But BHP is just getting started. It plans to spend $5.5 billion by 2015, and as much as $6.5 billion annually by 2020 on American shale gas. Both numbers are about a billion higher than the company’s previous estimates.

It’s clear from BHP’s past moves and the money it’s throwing at shale gas moving forward that it sees prices for gas gradually rising from their present near-record lows.

It’s not too surprising, really. With seemingly limitless supplies here, many utilities are looking at natural gas as the fuel of choice for new power plants. They’re also spending billions to convert existing coal-fired plants to run on it.

A Contrarian Strategy

And we have yet to even scratch the surface as far as natural gas-powered transportation goes. But many of Billiton’s competitors, lured by rising oil prices, have switched to drilling for oil, since it brings higher margins.

Wells cost the same to drill and hydro-frack, regardless of what’s down the hole. And right now, oil gives them a higher rate of return for each dollar spent drilling.

But Billiton is a huge, diversified resource exploration and production company. Shale gas fits right in with its portfolio of iron ore, coal, copper, uranium and petroleum businesses.

The company plans to spend $80 billion in the next five years to expand production across its entire portfolio of commodities. Natural gas from shale fits right in with its plans. The company is projecting 545 billion cubic feet (bcf) equivalent of natural gas next year.

Yeager also commented on concerns by some investors and analysts that hydro-fracking has problems. “The technology used here has been proven and used for a long, long time. We’re subject to inspection at any time… I think the opportunity for the industry to cut corners at any level is small.”

The reality is that over the next few years, natural gas prices will slowly rise for reasons mentioned earlier. Billiton is positioning itself to be one of the top producers and exporters here in the United States. Investors who want a diversified mining and natural resource production company would be hard-pressed to find a better play than BHP Billiton.

Good investing,

David Fessler