Reliance Industries’ bet with American shale gas has opened our eyes to a potential that exists in our backyard.
RIL ( Reliance Industries Limited ) today is sitting on almost $6 million cash and is considered as India’s largest company by value. It has however been prowling around the world for lucrative opportunities. RIL has already paid for a minor stake of 45% in Atlas Energy’s Marcellus lease and in Pioneer Natural Resources’ core Eagle Ford acerage.
RIL has been makin investments in thse companies without any majority control and also it has little presence and virtually no influence over the market. RIL has little knowledge about the terrain’s geology. And therein lies the key.
The shale story involves bombarding the sandstone rocks with millions of litres of chemically treated water to force the gas to flow. Shale gas is no different from from the regular natural gas ( methane primarily). It was however never pursued inspite of its presence over a wide area since several years due to the difficulties in extraction process.
There has been a stunning technological progress and medium sized oil companies figured a smarter way of drilling in the last 3 yrs. In the Marcellus basin in Pennsylvania for instance, reserves have grown from 15 trillion cubic ft from 5 yrs ago to 270 trillion cubic ft.
For Reliance , the partners exclusive knowledge in cracking the shale plays is what brings value. With RIL going through yet another deal with Carrizo over the Marcellus basin , oil analysts in India are starting to have a different opinion all together. They believe that for the Indian company the prize ultimately lies not in the Rocky mountains but back home.
Precious little has been done in India on shale gas prospecting so far, even though the rock formation is common in several parts of the country like Damodar basin, Jharkhand and West Bengal apart from parts of Andhra Pradesh and Gujarat. ONGC being probably the only company actively searching for shale gas reserves in India. The Indian government has no policy on shale and has not permitted exploitation of the gas. However, increased awarness of the global success and RIL’s high-profile investments can be expected to shake things up. The Indian market is energy starved and will grow much faster than the US in the future.
RIL clearly hopes to cut its teeth in the US market which is at the cutting edge of shale gas extraction. The aim is surely to be a big player in this area in India too. The experience will prove to be in value when India is ready to auction its own shale acerage. RIL for now is entering one of the fastest growing opportunities emerging in the US unconventional gas business.
RIL’s deals will materially increase it’s resources base and provide an entirely new platform. A platform from which it can grow into explortion and production business while simultaneously enhancing its ability to operate unconventional projects in the future. However, the big leap for RIL and India can come only when gas productions start here . As for long term investors RIL would certainly prove to be more than just beneficial.
——————————————————————————————————–
Statistical source: Forbes.
Reliance has made a significant statement with its investments in American shale. Undoubtedly, the technical knowledge gained will show up in further activities once India’s shale auctions begin and perhaps in the emerging plays in Europe.
http://www.naturalgasforeurope.com