France's Total SA has sent another energy industry signal that 2010 will be a year when global oil giants pump significant amounts of money into U.S. unconventional natural gas fields.

Total yesterday agreed to buy a 25 percent stake in Chesapeake Energy Corp.'s core assets in the Barnett Shale gas basin in northern Texas. The joint venture gives the Paris-based multinational oil company a foothold in the most productive natural gas field in the United States and the chance to partner with Chesapeake, the Oklahoma City-based producer that helped pioneer gas shale development and now controls significant acreage in the nation's largest onshore gas fields.

The Chesapeake-Total deal comes on the heels of Exxon Mobil Corp.'s announcement in mid-December that it would spend $31 billion to buy Fort Worth, Texas-based XTO Energy, which is also among the largest independent U.S. gas producers.

Natural gas emits about half as much carbon dioxide as coal when it is used to produce electricity. With states mandating emissions cuts and federal climate change bills on the table, power companies are expected to turn to natural gas as they search for ways to cut greenhouse gas emissions and meet power demand. Using natural gas to fuel some cars, buses and trucks could also change the equation for gas.

Meanwhile, the development of onshore U.S. gas resources has continued increasing despite a U.S. economic downturn that dampened gas consumption in 2009. Increasingly, analysts say conditions are right for joint ventures, mergers and acquisitions among companies with the capacity to partner successfully to pull gas out of shale rock formations under Texas, Louisiana, Arkansas, Oklahoma, Pennsylvania and New York.

Analysts say that as U.S. gas producers buy more acreage to increase their gas production potential, many of the producers will bump up against financial limitations and need bigger partners to pump capital into the expanding gas fields. And those potential partners, the integrated global oil producers, will see greater value in having access to U.S. gas reserves and more knowledge about technology driving the onshore gas boom in the United States. The gas industry contends there is a 100-year supply of onshore gas in the country.

Chesapeake and Total began discussing a joint venture seven months ago, company executives said. Under the deal announced yesterday, Total agreed to pay $800 million in cash and an additional $1.4 billion by funding 60 percent of Chesapeake's share of drilling expenditures. Total will acquire 25 percent of Chesapeake's Barnett new acreage over the next six years.

The companies also agreed to discuss a joint venture in the Eagle Ford Shale basin in Southwest Texas. Eagle Ford is among the nation's hot unconventional gas plays, where companies such as Chesapeake and Petrohawk Energy have bought up acreage with the intention of expanding their drilling activity. Chesapeake and Total also are discussing a joint venture to develop gas fields in Canada.

Joint ventures proliferate

About 270,000 acres of Chesapeake lease holdings in the Barnett fall under the deal with Total. That comes to about 700 million cubic feet of natural gas production a day and about 3 trillion cubic feet of proven gas reserves. About 60 percent of the area is already developed, but Chesapeake said the area can support about 3,100 new drilling positions. Chesapeake said it plans to continue buying up acreage in the Barnett Shale basin, and Total will buy its 25 percent share of that through 2015.

Aubrey McClendon, Chesapeake's chief executive officer, hailed the deal in a conference call with analysts.

"From Chesapeake's perspective, the Barnett was the only shale of the Big Four where we did not already have a partner, so it was a perfect fit for us," he said. The joint venture with Total is the fourth that Chesapeake has signed in the past 18 months. The deals together have raised nearly $11 billion and helped the company's cash flow, McClendon said. Plains Exploration & Production, BP America and Norway's Statoil have teamed up with Chesapeake to develop gas resources in Louisiana's Haynesville Shale, Arkansas' Fayetteville Shale and the Marcellus Shale in Pennsylvania.

"We have a very different business model here," McClendon said. According to McClendon, his company can project production volumes and project costs with far greater certainty than gas producers in the Gulf of Mexico. McClendon has argued that Chesapeake is undervalued by the stock market. But he has said gas shale assets are more reliable and predictable than some think and production costs will remain low compared to gas prices. Chesapeake's share price closed at $28.09 yesterday, an 8 percent increase over the previous trading day. The price continued climbing in after-hours trading.

Total CEO Christophe de Margerie characterized the partnership with Chesapeake as a strategically important move. "This joint venture will provide us with a solid position in an attractive long-term resource base under competitive terms," he said. Further, Total can learn more about the drilling process for unconventional gas with an eye toward expanding the business globally.

In the past decade, small and mid-sized gas producers paved the way for developing gas reserves in the nation's midsection that had been considered beyond the reach of technology to develop at a reasonable cost. Chesapeake and XTO have became among the most successful in the growing field of companies now applying technology that injects chemicals into the ground, fractures rock and unleashes trapped gas. That technology has raised environmental concerns, particularly in New York, about the potential for polluting watersheds.

International majors show interest

The deal with Chesapeake marks Total's return to the U.S. natural gas market. Total had an onshore gas presence during the 1980s and 1990s and maintains assets in the Gulf of Mexico, but offshore gulf production has been on the decline. The deal builds on Total's gas infrastructure tied to liquefied natural gas, including its capacity rights at the Sabine Pass LNG import terminal along the Louisiana coast.

Chesapeake executives have expressed interest in finding a partner for the company's Barnett production for months. Total had also made clear its interest in further expanding its global gas holdings.

"There's clearly been a lot of interest by these international majors in getting experience in gas shale," said Scott Hanold, a Texas-based analyst at RBC Capital Markets.

There is no clear outlook for 2010 in terms of potential joint ventures and mergers, Hanold said, but it isn't unusual for global oil giants to follow each other into new areas of development. Joint ventures give them a toehold in the U.S. gas market. But Hanold said they could try to scale up positions through acquisitions fairly quickly if development continues at a strong pace.

For Chesapeake, the joint venture helps the company chip away at its debt load, which has been exacerbated by low gas prices and the pace of ongoing production. McClendon emphasized the company's efforts to lock in future natural gas prices through a series of recent transactions in the derivatives market. More than half of its production is protected from precipitous price declines. "We will hedge more as opportunities present themselves in the next couple of weeks," he said.

Ray Deacon, an analyst with Pritchard Capital, said the joint venture fits into Chesapeake's yearlong emphasis on getting a handle on cash flow and debt issues.