Big oil companies pumping more money into natural gas production are expected to shift their focus to countries with less political risk like the United States and Australia, according to Goldman Sachs.

"This is primarily due to the large unconventional gas portfolio which adds significant U.S.-production, and the large weight of capital-intensive liquefied natural gas (LNG) projects in Australia," says a new report by the investment bank.

Integrated oil and gas companies such as Exxon Mobil, ConocoPhillips, BP, Chevron and Shell are becoming less inclined to tussle with unstable and erratic governments. In recent years, as mature oil and gas basins in the North Sea and the United States declined, the investor-owned companies have moved into riskier areas of Africa, the Middle East and Asia to replace those energy reserves and maintain their financial returns. Some have struggled to gain traction against national oil companies that control assets and have the backing of hostile government regimes.

But Goldman Sachs analysts say moving away from the politically risky areas comes with a trade-off. Companies will face technological challenges as they develop shale gas fields in the United States and ship LNG from politically safe regions.

"This step-up in technological risk is likely to lead to an increase in development times, delays and cost overruns," said the Goldman analysts in their report on the top 280 global energy projects.

Natural gas emits about half as much carbon dioxide as coal when it is burned to produce electricity, which means more electric utilities are expected to turn to gas as they develop new technologies that can cut greenhouse gas emissions. In the United States, the development of shale gas has increased despite an economic downturn that cut a deep gash in consumption in 2009, causing multinational oil giants such as Exxon Mobil to shift some of their focus to gas.

In addition, according to the Goldman Sachs report, multinational oil and gas companies are expected to shift their attention to gas projects in deep-ocean waters and at fields such as Shtokman in the Barents Sea off the Russian coast and the Shah gas project in Abu Dhabi, United Arab Emirates. Those projects are technological challenges.

Shifting risks

Goldman said energy giants will turn to gas production in the United States, Canada, Australia and other industrialized countries and ease up on capital spending in dangerous business environments. Iraq is considered the most politically risky place to drill, though Goldman's analysts expect redevelopment of the oil and gas fields to continue. Countries considered "very high risk" include Myanmar, Bolivia, Venezuela, Iran, Yemen, Uganda, Congo, Chad, Angola and Nigeria.

Technical risk will gradually replace political risk. "As a whole," says the report, "we do not believe that the risk profile of the Top 280 portfolio will change substantially as a result of this political de-risking, as we believe that technical risk is likely to increase."

New U.S. gas projects will require the use of high-cost drilling equipment and other advanced technology such as hydraulic fracturing, for example, which pumps chemicals into onshore gas fields to fracture shale rock and recover the trapped gas.

Unconventional gas drilling technology can be complicated, projects require access to costly rigs, and potential damage done to water tables has raised environmental issues. The bottom line, according to the industry, is that there is an ocean of untapped gas resources under Texas, Louisiana, Arkansas, Oklahoma, Pennsylvania and New York.

Goldman's analysts were particularly bullish about LNG out of Qatar, Russia and Australia. The export of natural gas around the world has grown, but the LNG market is not as mature as oil and has struggled against fluctuating prices and demand in Europe and the United States. China, however, is a major market. LNG production, called liquefaction, marches on in the Asia-Pacific region.

"The region is set to become a major area of liquefaction facility construction," says the Goldman report, naming four projects at onshore and offshore Australia gas fields.