Chinese oil firm gets $2.2 billion stake in controversial U.S. shale oil fracking industry

Oklahoma City, OK, United States (AHN) – Chinese oil company Sinopec has invested $2.2 billion in a deal with Devon Energy to get access to shale oil deposits in the United States through the controversial process known as fracking.

The deal gives Sinopec a one-third stake in five of Oklahoma-based Devon’s new shale projects. The firms expect to drill 125 wells for those projects this year alone.

Sinopec will pay Devon $900 million in cash and pay the balance by 2014. The $900 million covers Devon’s costs for the acquisition of mineral rights and drilling so far, company officials say.

This deal will give Sinopec more experience in hydraulic fracturing. China has some of the largest shale oil deposits in the world.

However, China isn’t the only nation investing in shale oil deals in the U.S. French company Total recently inked a $2.3 billion deal with Chesapeake Energy and EnerVest.

Although fracking is a relatively new process, problems from the practice are cropping up. Concerns over the possibility that it poisons drinking water have caused federal regulators, state and local lawmakers and environmental groups to question the practice.

Critics say that fracking has rendered water in some areas undrinkable and there is no known way to render the water safe to drink again.

The U.S. Environmental Protection agency has launched an intensive study to determine if fracking poses a danger to drinking water. Last month the EPA said it found poisonous chemicals used in hydraulic fracturing in drinking water in Wyoming. However, the oil company there says it doesn’t believe the EPA’s findings.

An earthquake in Youngstown, OH, on New Year’s Eve was linked to a well used to store drilling wastewater from fracking. The earthquake caused the state to stop operations at five such wells. Oil companies say that no one has definitively linked earthquakes to fracking.

Getting to shale oil involves boring horizontal wells by pumping a combination of millions of gallons of water, chemicals and sand under hydraulic pressure to crack rock to extract the oil and natural gas.

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