Mukesh buys stake in US gas project

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Silicon Path

Reliance Indus-tries has made its third billion-dollar plus acquisition in three months. RIL will pay a total of $1.315 billion (Rs 6,000 crore) to acquire a 45 per cent stake in a shale gas project in the US.
The move seems to be a part of a longer term strategy to acquire experience in producing natural gas from shale rock formations — which can then be used in India.
This project — Eagle Ford Shale — is being developed by US-based Pioneer Natural Resources. Under terms of the deal, Pioneer and its partner in the project Newpek, will transfer 45 per cent of their stakes to RIL. In return, the company will pay them upfront cash of $263 million and will pay an additional $1.052 billion over four years — to cover the capital costs of Pioneer and Newpek.
This will add 4.5 trillion cubic feet (tcf) of natural gas to RIL’s total reserves. This JV will control 263,000 acres of shale gas acreage — of which RIL’s share will be 118,000 acres. In April, RIL had paid $1.699 billion to acquire a 40 per cent stake in another shale gas project, also in the US. That acquisition had added 5.3 tcf of gas to RIL’s reserves. In comparison, the total reserve size of the company’s KG-D6 gas fields is estimated at 13.6 tcf.
A calculation done by Macquarie, a brokerage house, indicates that RIL is paying $273 for every million cubic feet of gas in the Eagle project — versus the $320 it had paid in the earlier deal with Atlas.
Both these projects will be supplying natural gas to the US domestic market. Shale gas has become an important source of energy in the US in the recent years.
RIL’s objective in entering these projects could be to gather experience in shale gas — which it may then be able to use in India. India reportedly has large natural gas reserves in form of shale gas in Rajasthan, Gangetic plain and Assam. Public sector oil major ONGC is also undertaking a pilot project for shale gas production in India this year.

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Learn with DC
QWhat does shale
gas mean?
Natural gas trapped in shale rock formations is called shale gas. It is one of the many ‘unconventio-nal’ sources of hydrocarbons, that are economically viable to produce only at high prices. Shale rock is the source rock where all hydrocarbons such as oil and gas are produced. Shale rock formations exi-st across all basins where oil or gas are available, and they may run into thousands of square kilometres.

Q How is shale gas produced??
It is more difficult to produce compared to gas from regular fields. It is produced by fracturing the shale rock — by injecting water at a high pressure. Sand particles are also injected along with water, which keep the rock fractures open after water is withdrawn, allowing gas to be produced. Large number of wells need to be drilled to produce shale gas, while in a regular field like KG basin, a few dozen wells are enough to tap the entire deposit.

Q How much of shale gas is available?
No clear estimates are available. The US is said to have anywhere from 500-1,000 trillion cubic feet (tcf) of shale gas reserves.
No formal studies on shale gas have been undertaken in India because it wasn’t viable. Based on incomplete information, the total reserves in India could be up to 500 tcf.