GAIL forms JV with Carrizo to acquire stake in US shale gas asset

Gail India Ltd, India's biggest gas transportation company, is buying a 20 per cent stake in one of Carrizo Oil & Gas Inc's shale gas assets in the US and invest $300 million (Rs 1,484.4 crore) over the next five years.

The deal with Carrizo comes after Reliance Industries acquired a 60 -er cent stake in the Marcellus Shale acreage in Central and Northeast Pennsylvania from Carrizo last year, for around $392 million. (See: Reliance in new 60:40 shale gas joint venture in US)

Gail's US subsidiary Gail Global (USA) will form a joint venture with Carrizo for the Houston-based company's Eagle Ford shale acreage, a move that is aimed at the state-owned company gaining expertise in the lucrative shale gas business and be better prepared when India's starts to auction shale gas blocks in December.

The joint venture will cover 20,200 gross acres, out of which Gail Global would have 4,040 net acres spread over four counties in Texas.

The deal involves Gail making an upfront cash payment of $63.7 million (around Rs312 crore) to Carrizo, and a carry amount of $31.3 million linked to Carrizo's future drilling and development costs, with the overall investment totalling to around $300 million over the next five years.

Carrizo will be the operator of the joint venture, which is expected to drill additional 139 wells in the acreage.