Reliance scales down its U.S. shale operations

Oil pumps
Source: DollarPhotoClub

The falling crude oil prices – from $90 to $53 a barrel within the last quarter – have caused Reliance Industries (RIL) to scale down its operations and capital spending on its North American shale properties.

Indian Reliance Industries has three upstream joint ventures exploring shale gas in the U.S. – with Chevron, Pioneer Natural Resource and Carrizo Oil & Gas, and a midstream joint venture with Pioneer. Aggregate investments since the inception of these JVs is $7.9 billion, with the December quarter’s capital expenditure at $264 million.

“Activity levels across the JVs are being optimised, with all three JVs actively pursuing operating expenditure and capital expenditure reduction initiatives in the current commodity price downturn. A challenged market outlook is likely to curtail near-term growth,” RIL said in its earnings statement for the quarter ending December 2014.

RIL said in a statement that, operationally, the business continued its strong performance, with production at record levels, especially at the Pioneer and Chevron JVs. Gross JV production averaged 1.25 bn cubic ft equivalent (bcfe) a day, growth of five per cent over a quarter and 21 per cent over the same quarter a year before.

Pioneer JV’s gross production was 725 million cubic ft equivalent (mcfe) a day, including 69,300 barrels a day of condensate, a three per cent growth over the previous quarter. Production at the Chevron JV was 366 mcfe a day, sequentially a six per cent growth.

“At Carrizo JV, market conditions forced temporary curtailment in production early in the quarter but supportive weather and the decision to flow wells at an operationally optimal level led to a 10 per cent sequential increase in production rates to 157 mcfe a day during the quarter,” RIL said.

Adding, “With the impact of stronger volumes offset by sharply lower realisation, overall revenues and Ebitda (operating earnings) for the quarter were sequentially lower by 16 per cent and 14 per cent, respectively.”

The company’s Eagle Ford Shale Midstream (EFS Midstream) – formed in 2010 to construct facilities for providing gathering and handling services for condensate and natural gas produced from wells in Eagle Ford Shale – continued with a strong performance, remaining one of the most competitive liquid shale ventures in the U.S. According to RIL, the business is well positioned to remain competitive even in a volatile price environment.

In October 2014, Reliance announced that it wishes to sell its 45 per cent stake in the Eagle Ford basin shale oil and gas venture in the US for an estimated USD 4.5 billion due to ‘negligible’ results and the falling crude oil prices.

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