GAIL India says it has big plans for the fast-emerging shale gas sector. Its move in September to take a 20 per cent stake in Carrizo's Eagle Ford shale asset in America was part of a larger scheme to go deeper into the business.
Chairman and managing director B C Tripathi says the state-run company is evaluating opportunities to spend at least $1 billion (nearly Rs 5,000 crore) over the next year or so to acquire larger shale gas assets, primarily in the US and Canada, and could have a deal in place in the next six months.
“The intention is to understand the shale gas business, to understand the technology and, as and when shale gas operations are announced in India, GAIL will be one of the front-runners in the domestic market,” he said while opening its office in Singapore on Wednesday.
At Carrizo’s Eagle Ford acreage, GAIL will spend about $300 million over the next few years to develop the asset and train about 10 members of its upstream team to better understand the sector.
“The first acquisition was comparatively small. We wanted to establish the internal processes and systems, as this is the first time GAIL has gone for any kind of acquisition abroad. The second objective was to understand the shale gas business and also give hands-on experience to our people,” said Tripathi.
The plan is for an “understanding” between GAIL and its foreign partners to collaborate on shale gas in India once the country’s upstream regulator, the Director General of Hydrocarbons, announces its policy for the sector, which Tripathi feels might happen within a year.
“When India unveils the shale gas policy and bidding rounds are announced, we will be aggressively participating in those rounds in the domestic market, with our international partners. These (companies) would already have the experience, and their experience and technology would be available to us. This will help us play in a more professional manner,” he added.
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While 60 per cent of the acquisition war chest of $1 billion will come internally, the remaining 40 per cent will be raised externally, as part of GAIL’s plans to annually borrow between $750 million and $800 million from the market.
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Having established a chain of foreign offices —including Egypt, where it is an equity partner in three gas retail ventures, the US and, most recently, Singapore — GAIL also hopes to strengthen its gas sourcing, gas trading and petrochemicals trading operations.
“At this stage, the primary objective is to secure gas to meet domestic demand and also to procure petrochemicals. And, going forward, export of petrochemicals to meet our export obligations and further into gas trading as we grow and expand,” said Tripathi.