MUMBAI : Two years after Reliance Industries Limited (RIL) adopted a zero drilling strategy to conserve cash, the company has resumed drilling in its shale gas joint venture with Chevron.
"Development momentum continued at both Chevron and Ensign joint ventures. In Chevron joint venture, eight wells were drilled during the quarter. Six new wells were also put on production, which is the first set of wells to be turned-in-line after a two-year hiatus," RIL said in its earnings press statement released on Friday.
RIL said overall production was 11% higher at 19.9 billion cubic feet equivalent (bcfe). New volumes during the second half of the quarter mitigated the natural decline of wells across both the joint ventures. Production expected to increase further during the fourth quarter of the year 2019, RIL added.
During the second quarter of calendar year 2019, RIL saw revenue from its Shale oil and gas operations drop 41.4% to ₹343 crore against ₹585 crore during the second quarter of the calendar year 2018. EBIT margin was down 101.5% against 50.3% during the same period, RIL said in the press statement.
RIL's US shale gas ventures have been facing challenges due to low shale gas prices. RIL and its partners had thus decided to rationalize portfolio investments.
Till 2014, RIL had been bullish on the shale gas segment but a fall in crude oil prices since late 2014 have hit valuations of oil and gas assets. Shale gas blocks have suffered far more than conventional oil and gas blocks as they are economically viable only when prices are above a certain threshold.
RIL had between 2010 and 2013, bought stakes in three upstream oil exploration joint ventures with Chevron, Pioneer Natural Resource, and Carrizo Oil and Gas, and a midstream joint venture with Pioneer. (Midstream refers to the processing, storing, transporting and marketing of hydrocarbons) Aggregate investments since the inception of these ventures were $8.2 billion till 2016.
In June 2015, the company sold its Eagle Ford (EFS) midstream joint venture with Pioneer Natural Resources in the US, realising $1 billion from the sale. RIL had spent $46 million in acquiring the 49.9% stake in EFS and invested another $208 million over the years.
RIL in March 2018 sold some of its assets in Eagle Ford shale position in the US to Sundance Energy Inc. for $100 million. It continues to retain its interest in the remaining Eagle Ford assets.