Oil and natural gas companies have set out to look for new reserves across the world and increase production. Recently, Royal Dutch Shell (NYS: RDS.A) (NYS: RDS.B) entered into a deal with Turkey to explore reserves off the shore of Antalya.
Let's make a deal
Shell has entered into an agreement with Turkey's state energy company TPAO for oil and natural gas exploration in the Mediterranean. The exploration will continue till the end of 2012, and processing would start in 2014. The deal gives Shell a 50-50 right to share production with TPAO, while the Turkish company's share will increase in the following years.
It should count
According to the U.S. Geological Survey, the Levant Basin in the Mediterranean contains almost 122 trillion cubic feet of recoverable natural gas. The country is highly dependent on oil imports, worth $50 billion. By tapping the resources available in the Mediterranean belt, Turkey may decrease its dependency on imports and in the process open up scope for Shell.
The deal could also give Shell a stronger foothold in the European and Asian markets. The Asian market in particular has the potential for high future demand. Many other oil and natural gas companies including ExxonMobil (NYS: XOM) , Total (NYS: TOT) , Chevron (NYS: CVX) , and Statoil (NYS: STO) are also in talks with Turkey to ink oil exploration deals in the Mediterranean near Iskenderun, east of Antalya. Shell also has a production sharing deal with TPAO at Diyarbakir, another potential reserve bed.
Foolish bottom line
Turkey has a vast oil and natural gas reserve and is geographically placed in an opportune location, having easy access to both European and Asian markets. Provided Shell drills out reserves from the area, the deal can turn out to be fruitful in the future. The stock is worth watching out for.
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At the time thisarticle was published Fool contributor Amitabha Chakraborty does not own shares of any of the companies mentioned in this article.Motley Fool newsletter serviceshave recommended buying shares of Chevron, Statoil A, and Total. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.