Indian Stock Market

Reliance Industries will be buying 60% in Carrizo Oil & Gas shale gas unit.The shale gas asset is at Marcellus Shale region.

This is third such Shale gas investment by RIL. I guess reliance is trying to spend the huge cash flows it has been getting.Good idea indeed. Company has been diversifying. My guess is company shareholders will be rewarded hugely when the company de-merges all business.

“Why Reliance is going so aggressively into shale gas is because reports indicate shale gas output will replace about 25 per cent of conventional gas production in the US over the next decade,” Sonam Udasi, head of research at IDBI Capital, said on Thursday.

“This is a longer-term plan to be one of the key five to six companies in the shale business in the world’s biggest energy market, the United States,” he said.

Oil companies including BP Plc, Total, Statoil and Mitsui & Co have bought into shales, rock formations that could hold vast amounts of natural gas.

Under the latest deal, Reliance will pay $392 million, comprising of $340 million of cash and $52 million to develop assets in the Marcellus Shale gas project — one of the most promising natural gas deposit regions in the United States.

The region, according to some geologists, could hold enough natural gas to satisfy US demand for a decade.

Under the deal with Carrizo, Reliance is paying about $6,200 per acre for its share of the Marcellus acreage. The company, at the forefront of India’s push in shale gas, had paid around $14,000 an acre under its deal with Atlas.

Reliance shares traded flat on Thursday in a Mumbai market up 0.2 per cent. Carrizo shares closed flat at $20.1 on Nasdaq on Wednesday.

While the shale formations have proven to be lucrative, they are also very expensive to develop and environmentally sensitive.

Joint ventures have given the independent oil companies, who own much of the acreage in these areas, access to capital and should allow foreign oil firms to pick up expertise in new drilling techniques developed for the shales.

COSTS

Reliance’s $52 million contribution to drilling costs will provide for 75 per cent of Carrizo’s share of development costs over an anticipated two year development program, the Indian company said in a statement on Thursday.

The deal is expected to close by mid-September.

The joint venture will have about 104,400 net acres of undeveloped leasehold in the core area of the Marcellus Shale in Central and Northeast Pennsylvania, of which Reliance’s 60 per cent interest will represent about 62,600 net acres.

Reliance will buy 20 per cent of Carrizo’s interest in a JV the US company has with an affiliate of private-equity firm Avista Capital Partners. Reliance will buy all of Avista’s interest in the JV.

Carrizo will serve as the development operator for the joint venture and Reliance has the option to act as a development operator in certain regions in the coming years as part of the joint venture.

Jefferies & Co Inc acted as lead financial advisor and Vinson & Elkins LLP acted as legal counsel to Reliance. BNP Paribas and Credit Agricole Corporate and Investment Bank provided strategic advice to Reliance.

Aban Offshore counter has seen a good junp today after months of lull.

The reason for todays jump is due to claim settlement of $235 million. The company has said it has received 975 of the amount and the balance will be on way soon.

The shares gained almost 9% today . I have been holding Aban Offshore long position for the past 2 weeks without any gain. Today i have seen 2% gain in my position.

Delhi sees CNG price shock

Indraprastha Gas Ltd (IGL) today hiked Compressed Natural Gas (CNG) prices here by over 25 per cent, following the government’s move to more than double the price of natural gas.

CNG rates in Delhi will go up by Rs 5.60 per kg – from Rs 21.90 to Rs 27.50 per kg, IGL said in a statement here.

“The new consumer price of Rs 27.50 per kg in Delhi and Rs 30.60 per kg in Noida, Greater Noida and Ghaziabad would be effective from midight tonight,” it said.

The hike was necessitated because of the government’s decision to raise natural gas prices from Rs 3.2 per cubic meter to Rs 7.5 per cubic meter ($4.2 per million British thermal unit).

IGL, however, did not increase the price of gas that it pipes to households for cooking purpose. Piped natural gas will continue to be priced at Rs 15.92 per cubic meter.

Sources said a rate hike would have resulted in piped gas losing its cost competitiveness over rival domestic LPG. IGL may decide to raise piped gas price by close to a rupee if the government were to raise LPG prices.

“We are constrained to increase the retail selling price of CNG in Delhi, Noida, Greater Noida and Ghaziabad due to the increase in the input price of gas procured by IGL along with its corresponding taxes and duties,” IGL Director (Commercial) Manmohan Singh said.

59% saving

Even after today’s price hike, CNG would still offer 59 per cent savings in terms of running cost compared to petrol driven vehicles at the current level of prices in Delhi. When compared to diesel driven vehicles, the economics in favour of CNG at revised price would be 28 per cent.

Singh said the increase in CNG prices will marginally impact the per kilometer running cost for the vehicles.

“For autos, the increase would be just 16 paisa per km, for car/taxi it would be 27 paisa per km and in case of buses, the increase would be Rs 1.60 per km, which translates to less than 3 paisa per passenger-km,” he said.

Prior to the price hike, CNG gave 40-41 per cent better fuel efficiency than diesel and 67 per cent saving over petrol in terms of cost.

CNG still the cheapest:

Even after the hike, CNG in Delhi will be the cheapest fuel in the country.

IGL in Delhi and MGL in Mumbai are the only city gas companies in the country that buy government-controlled gas, called APM gas, the price of which were raised last month.

APM gas makes up for 90 per cent of the fuel that IGL buys. It buys about 2 million standard cubic meters per day of APM gas from state gas utility GAIL India and the rest 0.2 mmscmd from Reliance Industries. PTI ANZ KM 06161826 NNNN

Latest discovery by scientists is that NY3 Bacteria is likely to clean oil spill.

About NY3 Bacteria:

The “NY3″ bacteria has an “extraordinary capacity” to produce rhamnolipids that can help break down oil and then degrade some of its most serious toxic compounds.

The rhamnolipids, which is non-toxic to microbial flora, human beings and animals, can help degrade polycyclic aromatic hydrocarbons (PAHs), a carcinogenic and mutagenic compound released with the oil spill, Oregon State University(OSU) said in a statement.

Orgeon University filing patent:

The OSU is filing for a patent on the discovery made by researchers from OSU and two Chinese universities, the Xi’an University of Architecture and Technology and Nanjing Agricultural University, Xinhua reported.

View of Researchers:

“Some of the most toxic aspects of oil to fish, wildlife and humans are from PAHs,” said Xihou Yin, one of the researchers. “They can cause cancer, suppress immune system, cause reproductive problems and damage nervous system”.

According to experts, the rhamnolipids produced by NY3 strain appear to be stable in a wide range of temperature, pH and salinity conditions, and strain NY3 aggressively and efficiently degrades at least five PAH compounds of concern.

“The search for safe and efficient methods to remove environmental pollutants is a major impetus in the search for novel biosurfactant-producing and PAH-degrading microorganisms,” the researchers wrote.

RIL ( Reliance Industries ) Oil discovery in Gujarat Block.

This is the 5th oil discovery of Reliance Industries. The discovery has been made in exploration block CB-ONN-2003/1, which is located in the Cambay Basin at a distance of about 130 km from Ahmedabad.

Reliance Exploration Bid:

Reliance had won the block in the fifth round of auction under the New Exploration Licensing Policy (NELP).

Well CB10A-J1 was drilled to a total depth of 1,957 metres in Part A of the block. “Hydrocarbon-bearing zone was identified at a depth of 1,376-1,385.5 metres,” it said.

“The well flowed at a rate of 255 barrels of oil per day” during conventional testing of the discovery, the company said.

Well CB10A-J1 was drilled with the objective of exploring the play fairway in the Miocene Basal Sand (MBS) of the Babaguru Formation and Eocence Pays of the Kalol Formation.

“The discovery is significant, as this play fairway is expected to open more oil pool areas, leading to better hydrocarbon potential within the block,” Reliance said.

About the exploration Block:

The block covers an area of 635 sq km in two parts, dubbed Part A and Part B. Reliance is the operator of the block with a 100 per cent participating interest.

The company has done 2D seismic surveys over the entire block area, while nearly 80 per cent has been covered with 3D seismic.

“Of the 15 exploratory wells drilled in the block by Reliance so far, 11 are located in Part A and the remaining four in Part B of the block. Reliance is continuing further exploratory drilling efforts in the block,” the statement said.

The discovery, named ‘Dhirubhai-48′, the fifth oil find in the block so far, has been notified to the government of India and to the Director General of the Directorate General of Hydrocarbons. “The potential commercial interest of the discovery is being ascertained through more data gathering and analysis,” RIL said.

Its clear that ICICI Lombard has insured 75% of Aban Pearl , an offshore rig owned by Aban offshore ltd.

Balance 25% is insured by New India Assurance and other general insurers.

But ICICI Lombard has said that its not going to get any hit as it has reinsured all the amount. It further added that the re insured has been intimated and is waiting for its advice regarding the same.

According to a note by domestic brokerage house Edelweiss, Aban Pearl was a significant financial contributor with annual revenues of USD 123 million. “The Aban Pearl accident and potential loss will be a significant negative. It may lower cash flows and debt repayment,” it added.

Source: Economic Times

Energy major Reliance Industries has found natural gas in four more areas in its field off the country’s east coast, two sources with knowledge of the matter said on Friday.

The company has informed the Directorate General of Hydrocarbons about the discoveries in the Krishna Godavari (KG) basin, and has sought permission from the regulator to further develop the fields, said the sources, who declined to be named as they were not authorised to speak with the media.

Source: Economic Times

Making a breakthrough in the US, Reliance Industries today said it will invest $1.7 billion in a joint venture with Atlas Energy Inc to produce gas from shale, sedimentary rocks, in Marcellus region. ( Watch )

The investment would be scaled up to $3.5 billion over the next 10 years, RIL CFO Alok Agarwal said.

Reliance will take 40 per cent stake in the about 300,000 acres Marcellus shale gas project, which spans parts of Pennsylvania, West Virginia and New York and could hold enough natural gas to satisfy US demand for a decade.

Nasdaq-listed Atlas will hold the remaining 60 per cent and also the operatorship. RIL had earlier unsuccessfully bid for acquiring controlling stake in bankrupt chemical maker LyondellBassel.

It bid $14.5 billion for Lyondell but the offer was vetoed by creditors who filed a rival revival plan.

Flush with revenues from its eastern offshore KG-D6 gas field back home, the Mukesh Ambani-run firm has been on the lookout of acquisitions in the United States. Separately, its twin refineries at Jamnagar in Gujarat are looking at directly selling fuel into the US.

“Reliance Marcellus LLC (a subsidiary of RIL) has executed definitive agreements to enter into a joint venture with US based Atlas Energy Inc… under which Reliance will acquire a 40 per cent interest in Atlas’ core Marcellus Shale acreage position,” the company said in a statement.

The Indian firm will pay $339 million in cash to close the deal and foot Atlas’ drilling cost of up to $1.36 billion.

“The (300,000 acres) acreage will support the drilling of over 3,000 wells with a net resource potential of about 13.3 trillion cubic feet gas equivalent,” the RIL statement said, adding that the deal is expected to be closed by the month end.

Shale gas is natural gas stored in organic-rich sedimentary rocks. It is considered an unconventional source as the gas may be attached to or “adsorbed” onto organic matter. The gas is contained in difficult-to-produce reservoirs that require special completion, stimulation and/or production techniques to achieve economic production.

In addition to funding its own 40 per cent of drilling obligations, Reliance has agreed to fund 75 per cent of Atlas’ respective portion of drilling and completion costs until the $1.36 billion drilling carry is fully utilized, Atlas said in a separate statement.

“Under the framework of the joint venture, Atlas will continue acquiring leasehold in the Marcellus region and Reliance will have the option to acquire 40 per cent share in all new acreages,” Reliance said. “Reliance also obtains the right of first offer with respect to potential future sales by Atlas of around 280,000 additional Appalachian acres currently controlled by Atlas (not included in the present joint venture).”

Essar Oil, a part of the Ruias-promoted Essar Group, said on Monday its promoter entities will consolidate their holdings in the company by way of transfer of shares amongst themselves later this month.

In a filing to the Bombay Stock Exchange, Essar Oil said that two of the promoter group entities -Essar Energy Holdings and Essar Investments Ltd- would consolidate their holdings through ‘inter-se transfer’ of shares between April 9 and April 30.

As per the proposed transaction, Essar Energy Holdings’s stake in Essar Oil will rise to 14.55 per cent from 6.22 percent after the acquisition of additional 17.47 crore shares from other promoters.

The promoters would acquire the holding in concert with other group companies, including Essar Global, Hazira Steel 2, Teletech Investments (India), Infotech Capital, Essar Steel Ltd, Essar Power Holdings, Essar Steel Holdings, Imperial Consultants, and Vadinar Oil.

Further, another promoter firm Essar Investments would indirectly hold 8.33 percent in the Essar Oil by acquiring shares in the company after the transfer through Teletech Investments (India).

The acquisition of the shares of Essar Oil from Essar Investments and Essar Energy Holdings would be at the closing price of the shares of the oil major a day prior to the date of the transfer.

As per December quarter shareholding pattern available on the BSE, Essar Investments held 3.26 percent, Essar Shipping Ports & Logistics Ltd held 0.32 percent, Essar Steel Ltd held 0.02 per cent, Teletech Investments (India) Ltd held 8.33 percent and Essar Energy Holdings Ltd 6.22 per cent stake in Essar Oil.

Essar oil starts coal bed methane gas exploration in ranigunj WB. Company has started works much before reliance natural resources ltd.

Essar Exploration and Production Ltd, an arm of Essar Oil, will invest $400 million (Rs 2,000 crore) in its coal bed methane gas Ranigunj in West Bengal by 2012, a top company official said here Thursday.

In April, we will start production of 100,000 cubic metres per day and scale it up to three million cubic metres per day by 2012,” said Prem Sawhney, chief operating officer of Essar’s clean coal business. operating officer of Essar’s clean coal business.”We plan to bring the gas to Kolkata by laying a pipeline from Ranigunj,” Sawhney told reporters on the sidelines of a conference organised by Confederation of Indian Industry. Confederation of Indian Industry. The company has got another block in Rajmahal in Sawhney, however, said work on this block would take another year to begin as environmental clearance and other due diligence work would take time to get completed.

L&T forms a Joint venture with Malaysia-based SapuraCrest Petroleum

Source: Economictimes

Engineering and construction major Larsen and Toubro Ltd on Friday formed a Joint Venture with Malaysia-based SapuraCrest Petroleum to install pipelines and construct offshore rigs and platforms in India, the Middle East and South East Asia.

L&T chairman and managing director AM Naik told reporters in Chennai today that his company has awarded $75 million (Rs 5,500 crore) contract to SapuraCrest Petroleum.

“L&T will hold a majority stake of 60 per cent in it,” he said.

Company officials exchanged documents in the presence of Malaysian Prime Minister Najib Tun Abdul Razak.

The JV was conceptualised in 2007 to build, own and operate the Derrick Lay vessel LTS 3000. Construction of the vessel, worth USD 175 million, is over and it is expected to undergo trials in the last week of this month, he said.

Work on the Mumbai High North Field Project would commence in mid-November 2010, involving installation of four jackets and associated structures, which would be performed by LTS 3000 vessel and the project is expected to be completed by January 2011, he said.

Company executives later told reporters that the vessel would be highly beneficial for the JV, as they have a project order book size of $500 million.

ESSAR OIL : LIC takes 2% stake in Essar oil.

State-run life insurer Life Insurance Corporation (LIC) has acquired nearly two per cent stake in Essar Oil for Rs 309.4 crore through open market transactions today.

LIC has bought 2.21 crore representing a 1.83 per cent stake in Essar Oil shares at the rate of Rs 140 a piece through a block deal on the National Stock Exchange.

Israel conflict will affect oil prices .This question will see answer soon.Oil Prices are already up from the low. 

Venezuelan President Hugo Chavez says he expects oil prices to keep climbing and predicts they could reach US$200 a barrel.

It isn’t the first time the Venezuelan leader has mentioned that benchmark _ though he hasn’t said when it might be reached.

Chavez reiterated the prediction after the price of light, sweet crude continued to rise on the New York Mercantile Exchange and settled at US$136.38 a barrel on Wednesday.

Chavez said in a televised speech Wednesday night that oil should be US$100 a barrel, but could keep rising to US$200.

He blamed the falling U.S. dollar, U.S. “threats” against Iran, and what he called “bad management” of the U.S. economy for driving rising prices.

Venezuela is the fifth-largest supplier of oil to the U.S