Reliance Among Bidders For El Pasos juicy Shale Assets

Indias Reliance Industries Limited, Norways Statoil ASA and Occidental Petroleum Corp

. seek to expand their stakes in US shale fields. They are among the bidders for El Paso Corp.s oil and natural gas unit. Kinder Morgan Inc. plans to sell El Pasos exploration to pay off debt from this weeks $21.1 billion takeover of the rival pipeline company.

El Paso Corporation provides natural gas and energy products, and their core businesses are: pipelines, exploration and production. El Paso is among companies that have expanded exploration into shale fields, which were too expensive to be developed a few years ago. The significance of the sale of the exploration unit is that Kinder needs the proceeds to pay down debt that will more than quadruple with the deal.

More than half a million acres of shale fields are put up for sale, and may demand a price of $7.3 billion. Dan Morrison, senior energy specialist at Global hunter Securities LLC in Fort Worth Texas said, Deep-pocketed bidders from outside the US are among the likely bidders. Morrison added, This will put out one of the juiciest acquisition targets weve seen on the market for a long time. The foreign buyers can certainly pay a premium because they need the operating entity in addition to the assets.

Reliance Industries Limited formed a joint venture with Atlas Energy Inc. and bid this year to buy the company, which was eventually sold to Chevron. In order to develop natural gas fields in Pennsylvania, Norways Statoil has formed joint ventures with Chesapeake energy Corp. Chinese Company Cnooc Ltd. would be a likely bidder too, as it already holds stakes in Texas shale-gas assets. Apache Corp., Hess Corp. and Occidental Petroleum share interest in the bidding, as it brings additional opportunities in shale fields.

Vice-President of research at Asian Markets Securities Pvt., Kamlesh Kotak said, Making a large energy purchase may be the best use of Mumbai-based Reliances cash. When RIL was approached for comments on this deal, Manoj Warrier, spokesperson of RIL said, As a policy, we dont comment on speculation.

The total value of the acquisition, including debt assumed from Houston-based El Paso, is $37.8 billion, Kinder Morgan said in a document. However, Kinder has declined to comment on the asking price.

by: Chintan Shah

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