US shale gas reserves estimates revised, RIL shares take knock

The shares of Reliance Industries Ltd (RIL) fell sharply on Friday on the back of reports that the estimate of the Marcellus Shale gas reserves in the US were much lower than estimated earlier. RIL has three joint ventures in the US, two of which are in the region.

RIL shares lost 4.6 percent in value against a 1.8 percent fall in the BSE Sensex. RIL accounts for close to 10 percent of the BSE Sensex.

The Marcellus Shale gas region that covers US states from New York to Virginia had over 410 trillion cubic feet of recoverable gas, according to a July 2011 report by the US Energy Information Administration.

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[caption id=“attachment_70667” align=“alignleft” width=“380” caption=“Workers prepare to change drilling pipes on the rotary table of a natural gas drilling rig. Tim Shaffer/Reuters”]  [/caption]

In a new report on Tuesday, the US Geological Survey (USGS) estimated a mean undiscovered natural gas resource of 84.1 trillion cubic feet.

“That amount is far higher than the geological service had estimated in a 2002 report, but far below a recent projection by the Energy Department,” said a report in The Washington Post.

“As a result, the Energy Information Administration, which is responsible for quantifying oil and gas supplies, has said it will slash its official estimate for the Marcellus shale by nearly 80 percent,” said The New York Times.

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“A spokesman for the Energy Information Administration said the USGS report supersedes a report last month by the energy agency. That report projected about 410 trillion cubic feet of undeveloped, recoverable gas reserves in the Marcellus region, which includes Ohio, Virginia, Maryland, Kentucky and Tennessee,” The Washington Post report adds.

When Reliance Industries announced three joint ventures in the US for shale gas, everyone wanted to know more about this resource found in abundance.

Reliance has invested close to $ 2.5 bn in these ventures with US-based Chevron (RIL- Chevron), Carrizo (RIL- Carrizo) and Pioneer (RIL-Pioneer).

Reliance Industries expects the potential of the two fields located in the Marcellus region to be over 16 trillion cubic feet. The joint ventures with Chevron and Carrizo are located in the Marcellus region. The company expected to get about half of that output when drilled through wells. The JV with Pioneer is located in the area of the Eagle Ford shale in south Texas.

The following is the chronology of US estimates:

* In 2002, the United States Geological Survey (USGS), America’s authority on natural gas and mineral finds, said that the Marcellus shale of New York and Pennsylvania then had 2 trillion cubic feet of natural gas.

* In July 2011, the US Energy Information Administration upgraded that estimate to more than 400 trillion cubic feet.

* On Tuesday, the USGS revised its initial estimate of 2 trillion cubic feet to 84 trillion cubic feet.

* The Energy Information Administration now plans to slash estimates by 80% to bring it in line with that of the USGS.