India's GAIL to buy Eagle Ford shale gas-condensate assets

A unit of state-owned GAIL India Ltd. agreed to invest in US shale assets by acquiring a 20% interest in Eagle Ford shale acreage from Houston-based Carrizo Oil & Gas Inc.

GAIL Global (USA) Inc. said its joint venture with Carrizo involves 20,200 gross acres, of which GAIL would have 4,040 net acres spread over four South Texas counties with most of the acreage being in La Salle County.

Terms call for GAIL to pay $95 million, starting with an upfront cash payment of $63.7 million and $31.3 million linked to Carrizo's future drilling and development costs.

Total investment will be around $300 million over 5 years, GAIL said.

This transaction marks the latest India company to acquire US shale assets.

During 2010 Chevron Corp. became operator of a Marcellus joint venture Atlas formed earlier with an affiliate of Reliance Industries Ltd., Mumbai.

Reliance Industries also has stakes in the Eagle Ford shale through a joint venture with Pioneer Natural Resources (OGJ Online, Jan. 20, 2011).

The Gail-Carrizo Eagle Ford venture is expected to drill 139 wells in the acreage. Carrizo will serve as the JV’s operator.

The transaction includes eight producing wells. Production is about 2,350 net boe/d of which Gail would have 470 boe/d net.

Gail and Carrizo have leases in Eagle Ford’s wet gas-condensate window.

GAIL Chairman and Managing Director B.C. Tripathi said India is expected to conduct shale gas bidding rounds opening within a couple of years. GAIL believes it will gain shale experience by working with Carrizo.

“Gail and Carrizo shall also work together in exploring shale gas opportunities in India and other countries outside of US,” Tripathi said, adding that the “next logical step” would be for GAIL to consider pursuing various upstream and midstream opportunities, including LNG exports to India.

Contact Paula Dittrick at paulad@ogjonline.com.

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