GAIL evaluates secret US shale gas opportunity

Vol 14, PW 20 (07 Apr 11) People & Policy

GAIL is talking to a US-based company about ‘farming-in’ to shale gas acreage in Louisiana and Texas to tap the ‘Eagle Ford Shale’ and ‘Barnett Shale’ geological formations.

“GAIL could be in a position to make an offer by April 15 after ‘due diligence’ and board approval,” an industry source tells PETROWATCH. First proposed by “an investment banker”, we hear, GAIL and its teams have been working hard on the proposal for over three months.

Details regarding the name of GAIL’s potential US partner and the size of the deal are still unavailable. But three GAIL teams are reported to have visited the site, dataroom and office of the concerned company.

GAIL wants a minority stake of between 10% and 20% in this US company’s shale gas acreage but is busy trying to “iron out differences” about the extent of reserves and the ‘resource base.’ “There’s presently no production from the shale gas acreage identified by this company for GAIL,” we hear.

“If GAIL decides to take a stake, its share of the acreage will be around 7000 acres.” GAIL is also clear the total value of the deal will be under Rs1000cr ($220m) so it won’t be forced to go through the long tedious process of seeking approval from India’s cabinet.

It sees its potential investment in US shale as the first step towards bidding for Indian shale gas blocks whenever they are offered in a future licensing round. “GAIL is mainly interested in acquiring shale gas technology to use in India,” we understand.

Eagle Ford Shale is a ‘Cretaceous’ sedimentary rock formation underlying most of southern and eastern Texas while Barnett Shale is a ‘Mississippian’ sedimentary rock formation located in Texas’s Bend Arch-Forth Worth basin.