Reliance Industries Plans Joint Venture with Atlas Energy to Develop Marcellus Shale Gas Field

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's largest business conglomerate, Reliance Industries Limited (BSE:500325) (RIL) (Mumbai), is reported to be in discussions with natural gas producer Atlas Energy Incorporated (NASDAQ:ATLS) (Moon Township, Pennsylvania) to participate in a joint development of the Atlas holdings in the Marcellus shale gas field.

Atlas controls approximately 519,000 acres of the Marcellus field in Pennsylvania and has mineral rights to another 1 million acres spread across Indiana, Michigan, New York, Ohio, Pennsylvania, Tennessee and West Virginia. The company announced last month that it was actively seeking a partner to develop its holdings.

Up to the end of last year, Atlas had drilled about 180 vertical wells and 18 horizontal wells across more than 266,000 acres in core drilling areas of the company's Marcellus holdings. It has identified more than 3,150 horizontal locations in its holdings.

Reports of the talks between RIL and Atlas come just a few days after RIL failed in an attempt to takeover the bankrupt petrochemical company LyondellBasell Industries (Rotterdam, Netherlands) for a reported $14.5 billion. Earlier this year, RIL made another abortive takeover attempt for a foreign company, this time involving a $2 billion offer for a majority share in the Canadian Value Creation Group (Alberta, Canada), which is involved in the Terre de Grace oil sands project. The RIL offer was rejected and Value Creation later entered into a partnership with BP plc (NYSE:BP) (London, England).

According to some analysts, RIL needs to become involved with overseas oil and gas companies to secure supplies for its massive refinery complex at Jamnagar in Gujarat. The complex consists of a 660,000-barrel-per-day (BBL/d) refinery, with a 580,000-BBL/d refinery located beside it that was commissioned in 2008, making the complex the largest oil refinery complex in the world.

RIL reported an annual turnover of $28.85 billion and a total income of $29.26 billion in the financial year 2008-09, while in comparison Atlas reported sales of $279.3 million and a net income of $40.8 million for 2009.

Deals between operators in the Marcellus shale gas fields and overseas companies are not unusual. The Anadarko Petroleum Corporation (NYSE:APC) (Anadarko) (The Woodlands, Texas) formed a joint venture this month to develop its Marcellus holdings with Mitsui & Company Limited (TYO:8031) (Mitsui) (Tokyo, Japan) in a deal in which Mitsui paid $14,000 per acre for more than 100,000 acres.

In another deal, the Chesapeake Energy Corporation (NYSE:CHK) (Chesapeake) (Oklahoma City, Oklahoma) sold 32.5% of its holdings in the Marcellus reserves to the Norwegian Statoilhydro ASA (NYSE:STO) (Stavanger, Norway) in 2008.

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