Reliance Industries Ltd (RIL) is close to finalising its third shale gas acquisition in the US. In what is being talked about as the company’s biggest shale gas deal so far, industry sources said RIL is in active talks to acquire a 50 per cent stake in a shale gas asset in North America. The acquisition is likely to be the biggest so far by IL, sources said.

In April, RIL had picked up a 40 per cent stake in Atlas Energy’s Marcellus Shale acreage for $1.7 billion, committing a capital expenditure of $3.5 billion over 10 years. For RIL, Marcellus is a strategic investment, as it is one of the most economically attractive unconventional natural gas resource plays in North America, due to low operating costs and proximity to the north-east gas markets in the US.

RIL picked up a 45 per cent stake in Pioneer Natural Resources’ Eagle Ford shale acreage for $1.3 billion in June. The deal was done through Reliance Eagle Upstream, an arm of RIL. Pioneer owns 46 per cent, while Newpeck holds nine per cent. Reliance Industries had agreed to make an upfront payment of $266 million in cash and contribute another $879 million towards Pioneer’s share of future drilling costs in the next four to six years.

Flush with revenues from its Krishna-Godavari (KG)-D6 gasfield back home, Mukesh Ambani’s RIL, sitting on cash reserves of close to Rs 22,000 crore has been on the lookout of acquisitions in US.

Shale gas extraction involves tapping natural gas trapped between layers of shale rock, similar to the extraction of gas from between coal seams.

More such acquisitions in shale gas projects in the US will follow, sources said. An RIL spokesperson refused comments on the development.

“Shale gas extraction is gaining momentum worldwide and especially in the US. An agreement is also expected to be signed between India and the US during the visit of US President Barack Obama later this year,” said a senior petroleum ministry official.

Besides acquisitions of shale gas assets by RIL in the US, ONGC is also likely to execute some agreements with US firms during President Obama’s visit to India.

Source:http://news-views.in/mukesh-ambani%E2%80%99s-ril-eying-third-us-shale-gas-deal-in-north-america/

Reliance Industries plans to sell gas to retail consumers in the US and will use its newly-minted partnership with Atlas Energy to try and build a brand name in the intensely competitive market.

Mukesh Ambani led RIL, which bought 40% in Atlas Energy some weeks ago, plans to use the pipeline infrastructure that Atlas already has to supply through its own network of gas stations in the world’s biggest energy market. An RIL spokesperson declined comment on the development.

A person close to the development said RIL’s US venture, a subsidiary of RIL Netherlands, will transport gas using the network. The company initially plans to supply to consumers in New York, Virginia among others.

Having acquired the stake in the shale gas fields, RIL along with its joint venture partner Atlas Energy will soon begin work on the development of the field to start producing gas. As opposed to many crude oil and gas acreages, the shale gas fields are all proven assets (where time and money are not wasted on exploration) and RIL can get into the development stage right away.

RIL already exports a bulk of its refined petroleum products, primarily gasoline, to the US markets but is not in the retail market.

But RIL officials are gung ho about the overseas operations. The firm is looking at increased revenues from its offshore assets in the coming years and is planning to invest a bulk of its capex in these markets in the years to come, an RIL official, who did not wish to be named, said.

“We are looking at an EBIDTA of at least 35% of our revenues from global operations,” he said.

Although gas markets are currently soft with demand for natural gas seeing a huge fall after the recession, it is expected to pick up in the medium term.

RIL may also soon have some more acreages of shale gas that Atlas is expected to close on shortly. As per the understanding, RIL will get 40% of the share in every new shale gas asset. Interestingly, apart from an assured share, the company also has an understanding that it would acquire the future stake at a price not higher than $8,000 per acre. It acquired its stake in Atlas for $1.7 billion, or $14,000 per acre.

Shale gas is like natural gas that is trapped within marine sedimentary rock layers and is considered to be a promising new source of hydrocarbons. The net potential of the Marcellus fields in Pennsylvania is approximately 13.3 trillion cubic feet equivalent (tcfe) of natural gas, with RIL having a claim of over 5.3 tcfe. RIL’s KGD6 gas field on India’s eastern coast has an estimated potential of 11 tcfe.