RIL's Shale Gas Business Sees Significant Growth
Reliance Industries’ shale gas business has seen significant growth as its production jumped 7-fold within one year. However, low gas prices along with high costs and infrastructure constraints are cause of concern.
The Economic Times has reported that the company's joint ventures will have to look for more liquid rich gas and cut costs to make their investments profitable.
In 2010 RIL had entered into three joint ventures (JVs) in the US shale gas assets. These were the JVs with Chevron and Carrizo in Marcellus shale play of Pennsylvania and Pioneer Natural Resources in Eagle Ford shale Play of South Texas.
During the year 2011-12, the company’s shale gas business grew significantly.
"As a result of these efforts, gross production from all three JV reported an exit rate of 233 million metric cubic feet per day (MMCFPD) of gas and 34.7 thousand barrels per day of liquids in December 2011 (a 7 fold increase on year-on-year basis)," the company said in its annual report, the Economic Times reported.
Biggest contribution to the output was attributed to the Pioneer JV, which stood at 41.7 billion cubic feet equivalent (BCFe), the newspaper reported citing the annual report.
With approximately 59% of the total production coming out as liquids this JV will continue to dominate RIL's revenues from shale assets in the US even in FY13.
In comparison Chevron and Carrizo JVs put together produced 10.7 BCFe as RIL's share during the year. Chevron JV's production was hampered due to regulatory and other delays, which should ease by mid-2012.
Despite the growth, RIL said in its report that low natural gas prices are making things difficult for the producers.
"FY 2012-13 will be a challenging year for shale gas, given the continuous weak gas prices, increasing wells costs in Eagle Ford due to market pressures and the need for drilling activity obligations to hold certain oil and gas leases, which will potentially expire in the near term," the company said, ET reported.