Mumbai: Reliance Industries Ltd, or RIL, plans to buy a 45% stake in the Eagle Ford shale gas field in Texas for $1.35 billion (Rs6,210 crore), according to the Financial Times , thereby acquiring its second shale gas asset in the US. An RIL spokesperson declined to comment.
The Eagle Ford shale is owned by Pioneer Natural Resources Co. In April, RIL took a 40% stake in Atlas Energy Inc.’s Marcellus shale in the US.
Shale gas is a form of natural gas trapped in fine-grained sedimentary rocks. Bloomberg reported the deal last fortnight.
“Shale gas is a very good business to enter. The internal rate of return is attractive since the risk associated with discovery and exploration is low,” said Deepak Pareek, oil and gas analyst at Angel Broking.
An oversupply of natural gas in the US has sent prices crashing, forcing US oil and gas firms to rely on foreign firms for capital. Pioneer and Atlas reported net losses of $245.25 million and $2.1 million respectively for the quarter ended 31 March.
RIL is likely to generate $18 billion in cash between 2011 and 2014, according to a Goldman Sachs estimate.
Analysts say that this is an opportune moment for a firm like RIL to invest in shale gas assets in the US.
“There might be an oversupply of natural gas now but eventually all energy gets consumed. The investments RIL is making now will only come on stream five-seven years from now, and by that time demand is likely to outstrip production,” said an analyst with an international consulting firm, who did not want to be named.
At RIL’s annual general meeting on 18 June, chairman Mukesh Ambani told shareholders that shale gas was likely to overtake conventional fuel as a source of energy within the next decade and that the company would work “with the best operators” as well as on its own “to build a substantial upstream business” in North America.
On the Bombay Stock Exchange, RIL fell 0.15% to Rs1,063.65, while the benchmark ended down 0.71% at 17,749.69 points.
Ashwin Ramarathinam contributed to this story.