GAIL India acquires first shale gas asset in the US

NEW DELHI: State-run GAIL, India's biggest gas transportation firm, has acquired its first shale gas asset in the US with an investment of $95 million.

"The company will acquire a 20% interest in Carrizo's Eagle Ford Shale acreage position," a company spokesman told ET. It has acquired stake through its wholly owned subsidiary GAIL Global (USA) Inc that was set up on Wednesday.

Gail has executed agreements with Carrizo Oil & Gas In, a NASDAQ listed company based in Houston, Texas, to enter into an unincorporated joint venture, he said.

"We believe that this transaction with Carrizo comes at an opportune time," GAIL chairman & managing director BC Tripathi said in a statement.

The joint venture will have 20,200 gross acres, out of which GAIL subsidiary would have 4,040 net acres spread over four counties in Texas, it said

Partners will spend around $300 million over a period of next five years to develop the asset. "This includes upfront cash payment of $63.7 million and a carry amount of $31.3 million linked to Carrizo's future drilling and development costs," it said.

Major part of these investments would be funded by the GAIL Global. The JV is expected to drill additional 139 wells in the acreage. Carrizo will continue to function as the operator for the joint venture.

The JV will include eight wells in the acreage, which are currently producing about 2,350 net barrels of oil equivalent per day, out of which GAIL's share will be 470 barrels of oil equivalent per day.

Over the last decade, advent of shale gas has changed the US oil and gas market. A number of shale gas plays has emerged out in North America, of which, Eagle Ford shale is considered as the most economically attractive unconventional resource play, as on date. The Joint venture's leasehold, is located in the wet gas/condensate window in the core area of the Eagle Ford shale in South Texas having significant liquids content, the statement said.

"Keeping in view the prospect of Indian shale gas bidding rounds opening within a couple of years, this experience will hopefully help GAIL develop necessary skill-sets for shale gas exploitation. Under the arrangement, GAIL shall be sending secondees to Carrizo to work on the Eagle Ford assets and GAIL and Carrizo shall also work together in exploring shale gas opportunities in India and other countries outside of US," he added.

Tripathi said "GAIL is very pleased to establish a long-term partnership with Carrizo in the Eagle Ford shale and it will be GAIL's endeavor to broad base its relationship with Carrizo. This transaction represents a major step in GAIL's efforts to establish its presence in North America. As the next logical step, GAIL Global will consider expanding its business portfolio in the North American market by pursuing various upstream and midstream opportunities including LNG export to India."

Jefferies & Company, Inc acted as exclusive financial advisor to GAIL. Thompson & Knight LLP acted as legal counsel to GAIL while Ernst & Young and RPS acted as tax & accounting and technical due diligence consultants respectively.

Carrizo Oil & Gas. is a Houston-based energy company actively engaged in the exploration, development, exploitation, and production of oil and natural gas primarily in the Eagle Ford Shale in South Texas, the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, the Niobrara Formation in Colorado, and in proven onshore trends along the Texas and Louisiana Gulf Coast regions, the statement said.

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