Continuing its pursuit of North Amercian shale assets, Mukesh Ambani's Reliance Industries Ltd has announced its joint venture with US-based Pioneer Natural Resources, where RIL will buy a 45% stake in Eagle Ford shale acreage position for $1.315 billion.
The deal involves RIL, India's largest private sector company, picking up stakes from Pioneer and its existing partner Newpeck LLC. After the deal, Pioneer will hold 46%, RIL 45% and Newpeck 9% in the JV covering 263,000 net acres.
RIL's implied share in the venture will be 118,00 net acres. The upstream transaction involves a combined upfront cash payments of $263 million and deferred payments of $1.052 billion associated with a carry arrangement for 75% of Pioneer’s and Newpeck’s capital costs over an anticipated four years, said a company release.
RIL has also formed a midstream joint venture with Pioneer through its subsidiary Reliance Eagleford Midstream LLC, where it will acquire a 49.9% stake for a payment of another $46 million. This JV will service the gathering needs of the upstream joint venture and both Pioneer and Reliance will have equal governing rights with Pioneer serving as operator.
The share price of RIL rose upto Rs 1064.3, up by more than 0.52%.
In April, RIL agreed to pay $1.7 billion to Atlas Energy to form a joint venture and own a 40% stake in Atlas' Marcellus Shale operations in eastern United States. By entering into a partnership with Atlas Energy, Reliance has access to approximately 343,000 acres of undeveloped land with estimated gross resource in excess of 13 trillion cubic feet of gas.
The Pioneer joint venture’s leasehold is largely undeveloped and is located in the core area of the Eagle Ford Shale in south Texas. Low operating costs,significant liquid content (70% of the acreage lies within the condensate window) and excellent access to services in the region make Eagle Ford one of the most economically attractive unconventional resource plays in North America, said RIL in a release. Pioneer believes the acreage will support the drilling of over 1,750 wells with a net resource potential to the joint venture of approximately 10 tcfe, of which 4.5 tcfe net to RIL.
The joint venture plans to increase the current drilling program to approximately 140 wells per year within three years. Also included in the transaction is current production of 28 mmcfe/d (11 mmcfe/d net to Reliance) from five currently active horizontal wells.
On RIL's 36th AGM held recently, chairman Mukesh Ambani had said, "Shale gas is the most promising development in the energy area in North America. It is likely to overtake both conventional gas as well as liquid fuels as a source of energy within the next decade." Shale gas development represents a low level of geological risk as the gas is trapped in rock across a wide geographical region in excess of tens of millions of acres. Reliance aspires to build a significant position in the shale gas business, he added.