OVL to Follow RIL's footstep in US Shale assets acquisition

by Amitjha | September 2, 2010 at 12:33 am

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Indian Government owned oil and gas public sector units are gearing up to acquire shale gas asset in U.S..The latest in the foray is Oil and Natural Gas Ltd (ONGC) foreign wing OVL. Following the footsteps of Reliance Industry Limited (RIL), the OVL is trying to get some partners in U.S. so they could enter the shale gas sector.

Energy hungry country like India is in dire need of sustained supply of gas so they could keep the growth engine ignited. Keeping that long term perspective in mind it is exploring all possible option to tap energy resources across the world.

OVL managing director RS Butola said, “The Company is pursuing several leads.” He added that, “OVL will enter into partnership instead of going for complete buyouts”.

Well, after late move, how long it will take for the PSU Company to make foray in this segment is not yet clear. They are looking for prospective experienced players who will partner with OVL so that they could follow the Reliance Industry Limited, owned by Mukesh Ambani, in shale acquisition mission overseas.

The RIL invested $1.7 billion in April this year to acquire and develop Marcellus shale in southwestern Pennsylvania in a joint venture with Atlas Energy of USA. This surprise catch of RIL surprised all major energy players, as per estimates the shale asset has estimated natural gas resource of 13.3 trillion cubic feet reserves, larger than RIL’s KG-D6 property.

Market is ripe with the news that RIL may forge a partnership with Chesapeake Energy Corp’s Eagle Ford shale acreage. The government owned energy firms of India do not want to lag behind and aggressively planning to acquire shale assets in U.S. and elsewhere.

Lesser known shale gas, which constitutes about 14% of U.S. gas production, is an unconventional source of natural gas trapped in hard rock called shale. Earlier, it was not possible to tap this huge natural resource trapped in micro pores of shale due to high technology cost. But recent development in exploration technology made it possible to extract gas from shale.

Gas production from shale is about one trillion cubic feet per year in U.S. The large scale production of shale gas led to a gas surplus leading to price reduction as much as 75% from its peak in mid 2008.