The Mukesh Ambani-led Reliance Industries (RIL), which has built a presence in the US in non-conventional energy by acquiring shale gas assets, is planning to enter the conventional hydrocarbon space. According to a Bloomberg report, RIL is in talks to buy the exploration and production (E&P) of US pipeline company El Paso Corp.
Private equity firm Apollo Global Management is among other companies in talks for the unit, which is estimated to be worth $8.1 billion by analysts at BNP Paribas, it said.
“Every Indian player is looking to go abroad to invest in assets, as India’s regulatory and business climate remains uncertain,” said an analyst with a domestic brokerage. “RIL, which has built a presence in the shale gas space, will look to have additional presence in the US, a rapidly developing gas market E&P activity in the US has got a new lease of life after shale gas discovery. The horizontal drilling technique used to extract shale gas has kicked up new momentum in E&P in North Dakota state,” he added on condition of anonymity.
Last month, a senior Reliance executive told Reuters that the company is scouting for oil investments in the Americas as it looks to boost the share of its crude production to feed its huge refinery in western India.
The company, which the market values at $44.5 billion, already owns stakes in three shale gas ventures in the US.
RIL got a major boost when earlier this year, UK’s BP said it will take 30 per cent stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG-D6 block, for $7.2 billion. BP would also make further performance payments of up to $1.8 billion based on exploration success that results in development of commercial discoveries.
Yet another $11 billion would be invested over many years to build a 50:50 joint venture formed by the two companies for the sourcing and marketing of gas in India, taking the overall investment to $20 billion.
US regulators last month made a second request for information about Kinder Morgan Inc’s planned $21 billion takeover of El Paso, first announced in October, in a deal that will combine the two largest natural gas pipeline companies. As part of the deal, Kinder plans to sell El Paso’s E&P assets to help finance the acquisition. The deal is expected to close by second quarter of 2012.
Reliance is yet to decide whether to make a bid for the unit, Bloomberg reported. “RIL will pay a reasonable price for the acquisition,” the analyst quoted above said. “The company had ended up paying 33 per cent more for Atlas Energy’s 40 per cent stake, which was ultimately acquired by Chevron. So it will be more cautious this time.”
Source: Express India