India’s energy giant Reliance Industries said on Friday it had signed a joint venture with Atlas Energy for a US$1.7 billion stake in a US-based natural gas field.
India’s largest private firm has now gained an overseas foothold through the Marcellus Shale deal, in what it calls one of “the most exciting” upstream markets of the world.
As part of the deal Reliance will pay US$339 million in cash and a further US$1.36 billion to fund part of Atlas’ drilling expenses and develop the project, the companies said.
The gas project spreads across parts of Pennsylvania, West Virginia and New York in the US.
Reliance will acquire 40 percent — or 48,560 hectares — of the total 300,000 hectares in Atlas’ core Marcellus position.
Pennsylvania-based Atlas will be the development operator of the joint venture, with a 60 percent stake.
“This is significant value creation for Reliance,” Reliance chief financial officer Alok Agarwal told a short press briefing late on Friday.
Reliance, controlled by India’s richest man, Mukesh Ambani, has been on the lookout for foreign takeovers as it seeks to expand outside the Indian market, where 97 percent of its assets are based.
The deal is set to be completed by the end of this month.
Reliance will also invest an estimated US$3.4 billion for its share of the development costs over the next 10 years, Agrawal said.
“Marcellus Shale fits into Reliance’s radar,” Deepak Pareek, oil analyst with Mumbai-based Angel Broking, told a local television channel.
“Reliance will generate strong cash flows going ahead,” Pareek said.
Reliance has built up a war chest for acquisitions, generating US$2 billion through stock sales since September, and has cash reserves of more than 250 billion rupees (US$5.5 billion).
In February, Reliance bid US$2 billion for a stake in Canadian oil producer Value Creation Inc, but lost out to Britain’s BP.
Last month, Reliance also failed in its US$14.5 billion bid for bankrupt chemicals group LyondellBasell, a Netherlands-based group with substantial operations in the US.
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