Reliance Industries exits shale gas business in North America

Reliance Eagleford Upstream Holding, LP (REUHLP) a wholly owned step-down subsidiary of Reliance Industries Limited (RIL), has divested its interest in certain upstream assets in the Eagleford shale play of Texas, USA to Ensign Operating III, LLC (Ensign), a Delaware limited liability company.

“With this transaction, Reliance has divested all its shale gas assets and has exited from the shale gas business in North America,” RIL said in a press statement.

A purchase and sale agreement has been signed between REUHLP and Ensign on November 5, 2021 for this sale. The sale is at a consideration higher than current carrying value of the assets, RIL said.This February RIL sold its entire stake in the Marcellus shale gas asset in south-western Pennsylvania in the US for $250 million.

The assets, controlled by RIL’s wholly-owned unit Reliance Marcellus LLC and operated by affiliates of EQT Corporation, a US based energy company engaged in hydrocarbon exploration and pipeline transport, was sold to Northern Oil and Gas (NOG) Inc.

RIL had bought stakes in three upstream oil exploration joint ventures with Chevron, Pioneer Natural Resource, and Carrizo Oil and Gas, and a midstream joint venture (midstream refers to the processing, storing, transporting and marketing of hydrocarbons) with Pioneer between 2010 and 2013 as the company was bullish on the shale gas segment.

However, the drop in crude oil prices since late 2014 hit valuations of oil and gas assets wherein shale gas blocks suffered far more than conventional oil and gas blocks as they are economically viable only when prices are above a certain threshold.

In June 2015, the company sold its Eagle Ford midstream joint venture with Pioneer Natural Resources in the US for $1 billion. RIL had spent $46 million in acquiring a 49.9% stake in Eagle Ford and invested a further $208 million.

In 2017 RIL sold the first of its shale gas business, upstream Marcellus shale gas assets in northeastern and central Pennsylvania, for $126 million. The Mumbai-based firm had in 2010 bought a 60% stake in the assets for $392 million.

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