Reliance Might Sell Its U.S. Shale Gas Holdings As Prices Set To Stay Depressed

29/07/2015 10:31 AM IST | Updated 15/07/2016 8:25 AM IST
Spencer Platt via Getty Images
ODESSA, TX - FEBRUARY 04: A truck used to carry sand for fracking is washed in a truck stop on February 4, 2015 in Odessa, Texas. As crude oil prices have fallen nearly 60 percent globally, many American communities that became dependent on oil revenue are preparing for hard times. Texas, which benifited from hydraulic fracturing and the shale drilling revolution, tripled its production of oil in the last five years. The Texan economy saw hundreds of billions of dollars come into the state before the global plunge in prices. Across the state drilling budgets are being slashed and companies are notifying workers of upcoming layoffs. According to federal labor statistics, around 300,000 people work in the Texas oil and gas industry, 50 percent more than four years ago. (Photo by Spencer Platt/Getty Images)

Reliance Industries Ltd is evaluating the sale of the company's investments in shale gas in the United States due to falling prices.

On July 24, Reliance, which operates the world's largest oil refinery, had said that upstream shale ventures were adversely affected by declining oil prices. Henry Hub gas prices averaged $2.72 per million British thermal unit - that's 44 percent less than a year ago. The company, controlled by billionaire Mukesh Ambani, had invested over $8 billion in gas joint ventures in the U.S. by March-end.

This won't be the first sale of its gas assets. Earlier this month Reliance, along with partner Pioneer Natural Resources, sold a pipeline in Texas for $2.15 billion.

Selling such assets will clear up capital for more productive uses. There seems to be onlymarginal recovery on the horizon for depressed gas prices. Hydraulic fracturing or fracking, where gas is extracted by cracking open rock formations, has led to a spike in natural gas production. The price has fallen by half since 2014, when it was trading at a 5-year high.

Reliance owns 45 percent stake in a project owned by Pioneer Natural Resources in Texas, and 40 of a venture controlled by Chevron Corp. in Pennsylvania. It jointly owns another project along with Carrizo Oil & Gas Inc., also in Pennsylvania.

The Mumbai-based company also produces gas in India, from the KG-D6 basin, in partnership with BP Plc. Gas yields have been dropping there since 2010, when it was found that production is more difficult than what the companies had initially expected.

The company had reported its highest quarterly profit in seven years on July 24, thanks to lower crude prices which allowed it to make higher gains on sales from its refinery.

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