GAIL India chairman and managing director B C Tripathi on Thursday announced the New Delhi-headquartered company’s first acquisition after he took over the reins two years ago. The buying of 20 per cent stake in Carrizo’s Eagle Ford acreage has a similarity with private-sector giant Reliance Industries Ltd’s presence in three different US shale gas ventures. In an interview with Jyoti Mukul, the boss of the 1984-founded natural gas processing and distribution company says the distinction lies in acquiring a stake in producing asset. Edited excerpts:
Are you following RIL’s footsteps, since they too have a tie-up with Carrizo?
It is only a matter of coincidence. They are in a different shale gas play. In RIL’s case, production has yet to start, but here the production is already happening.
Given that you are primarily a gas marketing and transporting company, why is GAIL venturing into the completely new field of shale gas?
The basic purpose is to have access to technology and gain experience through a small acquisition. Our 10 officers will be posted there. The acreage has more of liquid fuel than gas right now; so it will give us both kinds of experience. It will prepare GAIL to play a role in the shale gas business whenever it is launched in India.
Does this mean the foray is more for exposure than for investment?
It will give us exposure to the business and it is also an investment. The project is self-sufficient. It will generate sufficient cash to meet investment commitment of $200 million. We have created a subsidiary for the acquisition. The project will start giving cash surplus of around $40-50 million from the third year for the subsidiary. That will, though, depend on the future price of gas.
GAIL’s share in production is just 470 barrels a day of oil equivalent. The volumes do not justify export right now; so, is it just a beginning for the company?
We are looking for bigger acreages and better opportunities. Whenever the US governmenn allows export of gas in the form of LNG, we will do it. Approval for exporting is given on a project-to-project basis.
Will the search for shale plays be confined to the US?
We will not be confined to the US, though the biggest plays are in that country. We will look at a wider canvas.
How will LNG imports from the US compete with that from Qatar?
Ultimately, what matters is the delivered price of gas —whether from Qatar or the US. Right now, gas prices in the US are quite low. The gas production is at the lowest level at this stage, but there is an additional upside. We have taken into consideration a fixed price for the next 20 years, so we will have to see how future prices pan out.