RIL May Foray Into The Hydrocarbon space With The Purchase of El Paso Unit

The Bloomberg report announced that the energy giant, RIL (Reliance Industries Limited) is keen on buying the exploration and production (E&P) of the US Pipeline company El Paso Corp. After building a strong presence with its acquisition of shale gas assets in the US in the non- conventional energy, RIL may soon enter the conventional hydrocarbon space.  At present, the conglomerate has stakes in three gas shale ventures in the US with its valuation translating into an amount of $ 44.5 billion.

It was first announced by the US regulators, in October and then in November about Kinder Morgan Inc’s takeover of El Paso, for around USD 21 billion. This deal marked the association of the two largest natural gas companies. In addition, it was mentioned that Kinder intends to sell the E&P assets of the division, in order to make the acquisition more feasible for it. By the end of the second quarter of 2012, the deal is set to wrap up.

Other than RIL, private equities like Appolo Global Management are in talks to buy the unit. Analysts like BNP Paribas are known to estimate the figure to be $ 8.1 billion. Another analyst who is involved in domestic brokerage mentions that everybody is interested in investing their assets abroad, since the current regulatory and business climate of India seems volatile and RIL intends to expand its shale gas space activities in the US. The E&P activity in the US has marked a new high with its shale gas discovery and the horizontal drilling technique has further augmented the process in the North Dakota state.

Considering the size of its refinery in West India, Mukesh Ambani led RIL endeavors to expand its share of crude production to meet the needs and is hence, exploring for oil investments in the USA. In addition, the company tasted success as BP, UK announced its acquisition at 30% stake in the 23 Oil and Gas producing sharing contracts that it presently operates in the country other than infusing a colossal amount of $1.8 billion for further enhancements, paving way for the development of other viable discoveries. However, to build a 50:50 joint venture for the two companies with respect to gas sourcing and marketing, there would be a need of another $ 11 billion investment for a number of years, raising the overall installment to $ 20 billion.

RIL is presently, weighing the pros and cons and is yet to decide on its bidding, in the unit.