Sumitomo Corporation (President and CEO: Susumu Kato; Head Office: Chuo-ku, Tokyo) has announced that it has signed a participation agreement (the Agreement) with Carrizo Oil & Gas, Inc. (CRZO) for a 12.5% working interest of the Barnett shale gas core area drilling program (the Project). Sumitomo Corporation will be the first Japanese company to participate in the shale gas business.

 

[Outline of the Project]

- Location: Denton & Tarrant County, Texas, the United States (USA)
- Production (peak): 24bcf/year:
- Production commencement: in 2009
- Operator: CRZO (with 87.5% working interest)
- Our working interest: 12.5%.

 

1.Participation in the prospectus shale gas business will secure our future growth

 

　The shale gas business has been one of the most significant expanding areas in the exploration and production (E&P) business in the USA.  The USA is leading a major development in the E&P business which has been referred to as the "shale gas revolution". Sumitomo Corporation will be participating in the Barnett Shale Core Area drilling program which is the largest production area in the US shale gas business.

CRZO is the one of the leading companies in the shale gas industry and also holds leasing rights in the spot-lighted Marcellus Shale Gas Field in Northern Area of the USA. Sumitomo Corporation intends to expand our business in the shale gas industry and strengthen our partnership with CRZO to achieve mutual growth.

 

2.Portfolio enhancement of our E&P business

 

The U.K. North Sea is a core area in our E&P business, and we purchased 100% of the share capital of Oranje-Nassau UK in May. From the perspective of active replacement of assets, we have agreed to sell the entire share capital of Petro Summit Investment UK Ltd this November.

We intend to expand our E&P business and the property replacement was undertaken in order to achieve this goal.

This Project will be a link in the chain following the completion of our disposal and will strengthen our portfolio by creating access to the USA, which is the biggest natural gas production and consumption market.

We will be actively seeking opportunities for investment in the near future.

 

3.Establishment of Value Chain of Natural Gas business in the USA and achieving of Integrated Corporate Strength

 

Pacific Summit Energy LLC which is a fully owned subsidiary of Sumitomo Corporation and engages in the trade of natural gas in the USA will be able to handle the equity gas of Barnett Shale at the earliest. Through this participation, an establishment of a value chain from upstream gas development to sales of the production gas is created.

In addition, Sumitomo Corporation, a major supplier of Oil Country Tubular Goods (OCTG) in the USA, has focused on the shale gas business which has future growth potential. This participation would enhance our 'Integrated Corporate Strength' in the USA.

 

Related Link

• Carrizo Oil & Gas, Inc.　Website