Investor Wilbur Ross eyes JV in China shale tender

SINGAPORE Mon Sep 24, 2012 11:36pm EDT

Wilbur Ross, chairman and CEO of WL Ross & Co., speaks during the Reuters Restructuring Summit in New York, October 7, 2010. REUTERS/Keith Bedford

Wilbur Ross, chairman and CEO of WL Ross & Co., speaks during the Reuters Restructuring Summit in New York, October 7, 2010.

Credit: Reuters/Keith Bedford

SINGAPORE (Reuters) - Billionaire investor Wilbur Ross plans to take part in China's first shale gas tender open to foreign investors by teaming up Exco Resources (XCO.N), a U.S. natural gas firm he holds a stake in, with a Chinese partner.

China, believed to hold the world's largest reserves of shale gas, this month invited foreign-funded joint ventures to participate in the country's second tender for the resource, a gesture experts say was aimed at luring international firms with technology and operational expertise.

Since late 2009 China, the world's top energy user, has been hunting for the unconventional resource but has little commercial production to date. A shale gas boom is turning the United States into a gas exporter.

More than 100 Chinese companies, from utility firms to real estate developers, have shown interest in the 20 blocks on offer, with bids due late next month. No foreign joint ventures have been announced so far.

Ross, one of the world's best-known distressed-asset investors, travelled to Beijing this week to find a joint venture partner for Exco, which has been struggling with a sharp decline in natural gas prices.

Ross, who owns at least 12 percent of the company through his investment arm WL Ross & Co, became an Exco board director in March.

"I think we will have a joint venture partner. Bids are due in (late) October and we hope to be organized by then," the WL Ross CEO told Reuters at a conference in Singapore, though he declined to name the companies he was talking to.

SHALE TECHNOLOGY

Investing in shale gas in China will be more expensive than the U.S., where it costs around $5-6 million to build and operate a well, Ross said. He did not say how much he was looking to spend.

"The technology of horizontal drilling and fracturing is not that well developed yet in China," Ross said.

"There have only been 63 wells drilled with that technology, whereas there have been over 1 million drills in the United States. So I think there will be quite a few joint ventures between Chinese companies and American companies that have the technology."

Shale gas is trapped in rocks and requires a technology called hydraulic fracturing, or fracking, to unleash.

Beijing in March unveiled a target to pump 6.5 billion cubic meters of shale gas by 2015, roughly 6 percent of China's current total output.

SHIP AHOY

Ross, whose company manages around $10 billion in assets, made a name for himself as a bankruptcy specialist, snapping up out-of-favor assets ranging from banks and textiles to steel and coal firms.

Once dubbed the "King of Bankruptcy" by Fortune magazine, Ross has recently turned to the troubled shipping sector, buying a majority stake in energy transportation firm Navigator Holdings NVIGF.PK last month and helping finance Diamond S Shipping's purchase of 30 oil product tankers in 2011.

"We are very happy with our existing investments," Ross said. "We would look for more investments probably mainly in liquids, rather than in containers and dry bulk."

The shipping industry is struggling through a severe four-year downturn, driven by a ship supply glut, rock bottom freight rates, high bunker fuel prices and global economic turmoil.

(Editing by Joseph Radford)

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