RIL may buy stake in Pioneer Natural's US shale gas assets

Reportedly in talks with Shell, Exxon to finalise the deal.

Mukesh Ambani’s Reliance Industries (RIL) is in talks to buy a stake in shale gas assets owned by Pioneer Natural Resources in the United States.

According to agency reports, RIL may join Royal Dutch Shell and Exxon Mobil in buying the assets. Pioneer has about 310,000 acres of shale gas acreage in the Eagle Ford region in US’s South Texas. The company had last month said it would be announcing a joint venture for the assets in the second quarter.

When asked, an RIL spokesperson said, “We are talking to many people and till the deal materialises, we cannot comment.” The transaction is said to be in line with RIL’s recent acquisition of 40 per cent interest in Atlas Energy’s Marcellus Shale acreage.

Shale gas is natural gas stored in organic-rich sedimentary rocks. It is considered an unconventional source, as the gas may be attached to organic matter. The gas is contained in difficult-to produce reservoirs that require special techniques to achieve economic production.

Of all US gas production, 15-20 per cent comes from shale. Its production is expected to quadruple in the coming years. Companies across the globe are increasingly looking at investing in shale gas; it is considered lucrative.

According to analysts, with RIL working hard to expand international presence, it is important for the company to be in the shale gas business. Doing so would also help it participate in the US gas market.

The size of the Atlas deal, announced in April, was $1.7 billion, with RIL committing to a capital expenditure of $3.5 billion over 10 years. While Atlas would hold 60 per cent of the block and also the operatorship, RIL was expected to begin acting as development operator in certain regions in the coming years as part of the joint venture. “Low operating costs and proximity to the US northeast gas markets combine to make the Marcellus one of the most economically attractive unconventional natural gas resource plays in North America,” RIL had said in a press statement. The acreage would support the drilling of about 3,000 wells, with a net resource potential of approximately 13.3 tcfe (5.3 tcfe net to RIL).

For the year ended March 31, RIL had cash and cash equivalents of Rs 21,874 crore in fixed deposits, certificates of deposits with banks and government securities and bonds. The RIL scrip closed at Rs 1,015.35, up 0.8 per cent on the Bombay Stock Exchange.