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.