RIL Expects 50% Annual Growth in Shale Gas Volumes

Reliance Industries expects it shale gas business to become a material contributor to the company’s earnings in next three years.

By 2015, RIL expects shale gas volumes to grow at a compounded annual average of 50 per cent, with the business to contribute eight to 10 per cent of earnings before interest, tax, depreciation and amortisation (Ebitda), Business Standard reported.

In 2010, RIL had entered into three joint ventures (JVs) in US shale gas assets. The upstream JVs were with Chevron, Pioneer Natural Resource and Carrizo Oil & Gas, and a midstream joint venture with Pioneer.

Last quarter, it had said shale gas was profitable, despite low gas prices. This quarter, the share of gross production was up 18 per cent sequentially, the newspaper said.

RIL reported revenue of Rs 737 crore ($134 million) and Ebitda of Rs 528 crore ($96 mn) from its shale gas assets during the quarter. The company on its website said drilling efficiency improved in all JV’s and trials are on to lower development costs.

During the last quarter, shale gas revenue for RIL was Rs 1,300 crore ($250 million, dollar at 52/Re), while profit after tax stood at Rs 156 crore ($30 million) and Ebitda at Rs 1,040 crore ($200 million).

RIL’s Pioneer JV has 12 rigs operational. During the quarter, the company accelerated the pace of construction and connectivity by putting 37 wells on production versus 26 wells in the last quarter.

There has been a significant ramp-up in production, with an average gross production rate at 381 million standard cubic metres per day (mscmd) against 358 mscmd during the last quarter. The company has incurred capital expenditure of $2.23 bn to-date on the asset.

RIL's Chevron JV, despite regulatory and other delays, reporterd an average gross JV production rate of 87 mscmd against 73 mscmd in the March quarter of 2011-12. In its annual report this May, it had said these regulatory delays should ease by mid-2012. Capex spend on the Pioneer JV has been Rs 6,600 crore ($1.2 bn) to date.

The company's Carrizo JV reported an average gross JV production at 61 mscmd against 26 mscmd in the last quarter, up 135 per cent. "Strong growth was supported by higher wells online and lesser downtimes," the company said.