Reliance Industries enters joint venture with Atlas Energy

The joint venture between Reliance Industries and Atlas Energy will cost Reliance US$ 339 million up front when the deal is closed, followed by US$ 1.36 billion dollars of expenditure to help cover Atlas’ exploration costs for seven and half years, as well as US$ 3.4 billion to cover its own exploration expenditure over the next 10 years.

Reliance has significant cash reserves, generating US$ 4.2 billion in the first nine months of FY10. The first cash payment can easily be met out of the company’s reserves, and the company will be able to meet the future costs out of revenue derived from existing assets. Although the joint venture may not yield a profit for some years it will allow Reliance to gain access to and experience with the technology needed to exploit shale gas reserves. It also enables it to deploy at least part of the massive cash reserve it has built up.

Reliance Industries embarked on an aggressive plan to acquire global reserves last year; it unsuccessfully attempted to acquire stakes in LyondellBasell, the Dutch petrochemical major, and Value Creation, the Canadian oilsands company.

In return for this investment, Reliance acquires a 40% share of Atlas acreage at Marcellus Shale in Pennsylvania, which equates to 120 000 acres of the 300 000 acre site. The area is supposed to hold some 13.3 trillion ft³ of gas and should be able to support over 3000 wells. As part of the deal, Reliance also has first refusal in case Atlas Energy decide to sell any of its 280 000 Appalachian acres.

The joint venture has already made five-year development plans for the drilling of 45 horizontal wells in 2010, increasing to 300 in 2013.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/14042010/reliance_industries_enters_joint_venture_with_atlas_energy/