Exxon agreed to buy XTO Energy in an all-stock deal at a 25 percent premium, showing how eagerly a company that is among the most conservative in a conservative industry is jumping into the market for natural gas.
As negotiators haggled in Copenhagen over a global plan to curb carbon emissions, the deal suggested that Exxon sees change coming for an energy source best known now for heating homes.
The deal announced Monday was also the largest for the U.S. energy sector in at least four years and Exxon's biggest acquisition since it bought Mobil Corp. for $75 billion in 1999.
RelatedPoll: Most in U.S. back climate treatyGore warns polar ice may vanish by summer of 2014Dispute halts climate change talks for hoursTopic page: Climate changeThe technology to unlock natural gas from tight rock formations has advanced so rapidly that energy experts have raised their estimates of how much fuel is available by 35 percent in just two years.
Carbon policy spurs actionThe emergence of massive supplies of natural gas in the U.S. coincides with the nation's focus on cutting emissions.
The newfound supply and looming climate legislation have been cited by utilities this year as they have shuttered old coal-fired power plants and scrapped plans to build new ones.
Climate legislation would put utilities in the crosshairs, and many are aggressively seeking new fuels like natural gas to minimize the economic hit.
"From the outside view, it does look like this move makes much more sense in a world where there's carbon policy because that ensures a growing market for natural gas," said Amy Jaffe, a fellow at the James A. Baker III Institute for Public Policy at Rice University.
Just this month, Progress Energy became the latest utility to announce that it would close coal-fired power plants in favor of natural gas. Exxon Mobil expects global demand for gas to grow 50 percent by 2030.
"Natural gas is really well-suited to meet that growing power generation demand, both from the standpoint of its lower
environmental impact, but also its capital efficiency and its flexibility," Exxon Mobil Chairman and
CEO Rex Tillerson told analysts.
Through August, utilities used gas to generate 23 percent of the nation's electricity, up nearly three percentage points from last year. Coal's share was down about 13 percent.
XTO claims about 45 trillion cubic feet of gas, much of it trapped in tight shale formations.
Technology developed over the past decade has made it much cheaper to pull natural gas from those formations.
Already on Monday, energy experts were laying odds as to which natural gas companies would be sold next, and which major oil companies might follow Exxon's lead by snapping them up.
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