Forbes: RIL's Shale Bet Fades As the US Floats on Gas

When Reliance Industries was negotiating its $3.4 bn investments in US shale companies- the world was different. America was energy starved and looking desperately for ways to reduce dependence on the Gulf. For RIL, shale gas was seen as the next big thing, after its offshore find earlier in the decade. It would give the energy giant knowledge of the new ways of gas production, as well as allow it to ride the gas price boom. Three years down the picture is different. The United States is floating in natural gas- storages all over the country will max out in the next few months and prices are at ten-year lows.

Some say producers may soon have to give away the gas free- with money being made only on associated liquids and condensates that were initially considered by-products. RIL is `right-sizing’ its activity in the shale fields and the portfolio mix on its investments in shale assets. Like other producers here, it will focus on ramping up its production in liquid-rich fields and cutting costs at fields where there are little or no liquids. Gas prices that peaked at $13 a unit (measured as mmbtu-million british thermal units) in 2008, are marginally above $2 now. Prognosis for gas prices over the next few years is not too bright. But the associated liquids still trade at roughly 50 per cent of oil prices- which are still very high. MORE