Mukesh Ambani's Reliance Industries to pick 60% stake in US shale-gas venture

Online, August 5, 2010 (Newswire.com) - Mukesh Ambani led Reliance Industries announced that it will acquire 60 per cent stake in a shale-gas venture in the US for $ 392 million. On Thursday, India's largest industrial group Reliance Industries informed its investors that the company's subsidiary Reliance Marcellus II LLC has entered into a joint venture agreement with the US based Carrizo Oil & Gas, Inc. according to the industry sources, Reliance Industries Limited will pay 340 million in cash and the remaining $ 52 million in drilling cost to Carrizo Oil and Gas. After this transaction, Reliance will acquire 100 per cent of Avista's interest and 20 per cent of Carrizo's interests in this joint venture. The completion of transaction will lead to Reliance and Carrizo owning 60 percent and 40 per cent of the interest respectively. As per the media reports, Reliance Group will acquire 60 per cent interest in Marcellus Shale acreage in Central and Northeast Pennsylvania.

The latest move by Reliance Industries Limited will further expand the shale gas portfolio of the Indian giant in the US. While making an announcement about this joint venture, Reliance confirmed that the agreements to enter into a joint venture were signed by its subsidiary company in the US. Commenting on this joint venture, President, International E&P Business, Reliance Industries, Mr. Walter Van de Vijver said, "Reliance is excited about the opportunity to further expand presence in the Marcellus Shale in the United States. We are pleased to establish a longâ€term partnership with Carrizo, which has demonstrated operating expertise in the shale plays. The proposed joint venture will supplement strengths achieved through our recent joint ventures and further expand our footprint in North American shale gas operations."

Talking about this joint venture between Reliance Group and Carrizo Oil and Gas Inc., Deepak Pareek, an analyst said, "This is a consolidation of its shale-gas positions in the U.S., where the market is huge and shale resources are plenty. The success depends on how quickly they can produce and ramp up and capture a share of the market." According to the sources, Reliance has been investing heavily in new areas such as shale gas as it wants to have a foothold overseas and seeks to expand the business beyond petrochemicals, refining oil, gas exploration and retail. Though shale formations are lucrative, however it is quite expensive to develop it and to make it environment sensitive. This acreage is expected to support the drilling of almost 1,000 wells over the next 10 years.