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RIL may close $1.35-billion US gas deal

BS Reporter  |  Mumbai 

Will be the company’s second acquisition of shale gas assets.

Reliance Industries Limited (RIL) is close to buying a 45 per cent stake in shale gas assets owned by the US-based Pioneer Natural Resources for $1.35 billion. An RIL spokesperson said the company couldn’t make a comment at this point, but agencies quoted sources familiar with the development as saying the deal could be announced in a couple of days.

Pioneer has about 310,000 acres of shale gas plays in the Eagle Ford region of Texas, US. The company had last month said it would be announcing a joint venture for the assets in the second quarter.

This would be RIL’s second acquisition of shale gas assets in the US. The company had in April bought 40 per cent interest in Atlas Energy’s Marcellus Shale acreage.

Mukesh AmbaniThe Atlas deal size was $1.7 billion, with RIL committing to a capital expenditure of $3.5 billion over 10 years. While Atlas will hold 60 per cent of the block and also the operatorship,  RIL is 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 statement.

THE ACREAGE will support the drilling of over 3,000 wells with a net resource potential of approximately 13.3 tcfe (5.3 tcfe net to RIL).

At the company’s 36th annual general meeting last week, RIL Chairman Mukesh Ambani had said: “Shale gas is the most promising development in the energy area in North America. It is likely to overtake both conventional gas as well as liquid fuels as a source of energy within the next decade. Reliance aspires to build a significant position in the shale gas business.”

Analysts said RIL can participate in the US gas market only by being a part of the US’ shale gas business.

Shale gas accounts for 15 to 20 per cent of US gas production. Its production is expected to quadruple in the coming years. across the globe are increasingly looking at investing in shale gas.

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 completion, stimulation or production techniques to achieve economic production.

For the year ended March 2010, RIL had cash and cash equivalents of Rs 21,874 crore in fixed deposits, certificate of deposits with banks and government securities and bonds.

RIL shares lost 0.15 per cent today to close at Rs 1,063.65 on the Bombay Stock Exchange.

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First Published: Wed, June 23 2010. 00:21 IST