Oil India tipped to announce shale gas acquisition tomorrow

The govt is expected to sell 10% stake in OIL this year, shale deal could fetch a better valuation

State-run oil explorer Oil India is expected to announce a deal for acquisition of an interest in a shale gas play in the US. The company was said to be in talks with Carrizo Oil & Gas to acquire stake in its shale plays in North Eastern Colorado.

When contacted, a company spokesperson did not confirm the move but added that an announcement related to "strategic company development" would be made tomorrow in a press conference. The government is expected to sell 10 per cent stake in OIL this year and the shale deal could fetch it a better valuation.

Analysts say since US shale gas prices are dipping, thanks to an uptick in production, the price at which Oil India enters will be crucial. Houston-based Carrizo Oil & Gas is an independent energy firm engaged in shale plays in the US and the UK. Its operations span the Barnett, Eagle Ford, Marcellus and Niobrara shale plays.

Last September, state-run GAIL had acquired 20 per cent stake at Carrizo’s Eagle Ford shale acreage in south Texas for $95 million. The acquisition was GAIL ’s first shale gas asset in the US. GAIL and its partners are expected to invest up to $300 million over the next five years at the field. GAIL acquired the stake through its wholly-owned subsidiary GAIL Global (USA) Inc.

Similarly, Mukesh Ambani-promoted Reliance Industries (RIL) holds 45 per cent stake in Eagle Ford and 60 per cent stake in a Marcellus Shale gasfield through a joint venture with Carrizo.

RIL’s shale gas business in the US comprises three upstream joint ventures with Chevron, Pioneer Natural Resource and Carrizo Oil & Gas, and a midstream joint venture with Pioneer. Aggregate investments since the inception of these joint ventures stood at Rs 22,000 crore ($4 billion) as at the end of the first quarter of this financial year.