RIL to buy 60 stake in US gas venture

The remainder USD 52 million would in Carrizo8217;s drilling cost in the Marcellus shale-gas areas of central and northeast Pennsylvania.

The Mumbai-based firm in April had bought a 40 per cent stake in Atlas Energy Inc8217;s Marcellus Shale acreage for USD 1.7 billion. In June,it had agreed to buy a 45 per cent stake in Pioneer Natural Resources Co8217;s Eagle Ford shale natural gas asset in Texas for about USD 1.36 billion.

Reliance would have a net share of 62,600 acres of Carrizo8217;s shale acreage,smaller than the 137,000 acres in the Atlas venture and 118,000 acres in Pioneer8217;s assets.

The resource potential in the Carrizo areas is a gross 3.4 trillion cubic feet of gas compared with 10 trillion cubic feet in the Pioneer areas.

Reliance said its 8220;subsidiary,Reliance Marcellus II,Llc,has signed definitive transaction agreements to enter into a Marcellus Shale joint venture with US-based Carrizo.8221;

Under the proposed transaction,Reliance will acquire a 60 per cent interest in Marcellus Shale acreage in Central and Northeast Pennsylvania that is currently held in a 50:50 joint venture between Carrizo and ACP II Marcellus LLC,an affiliate of Avista Capital Partners.

8220;Pursuant to the transaction,Reliance will acquire 100 per cent of Avista8217;s interest and 20 per cent of Carrizo8217;s interests in the joint venture,8221; it said. 8220;Upon completion of the transaction,Reliance and Carrizo will own 60 per cent and 40 per cent interests respectively.8221;

Shale gas is one of the hottest investment plays in the energy sector,with a string of multibillion dollar deals having been done over the past year prompted by technical advances which have unlocked huge and previously inaccessible natural gas reserves.

The Marcellus Shale is a giant rock formation underlying Pennsylvania,New York and other states. Shale has long been known to contain natural gas,but this was not worth extracting with conventional technology.

8220;Carrizo will serve as the development operator for the joint venture and RIL has the option to act as a development operator in certain regions in the coming years as part of the joint venture,8221; the statement said.

The transaction is anticipated to close by mid-September 2010.

Reliance Chairman Mukesh Ambani in June had given a glimpse of his company8217;s ambitions in shale gas space.

Reliance,he had told shareholders meet in Mumbai of June 18,aspires to build a significant position in the shale gas business as it presents a low-level of geological risk because the gas is trapped in rock across a wide geographical region.

Ambani,the world8217;s fourth-richest man,also stated at that meeting that shale gas is likely to overtake conventional gas and liquid fuels as a source of energy in the next decade and Reliance will commit investments with low-cost operators to expedite the development of this resource.

Reliance President for International Eamp;P Business Walter Van de Vijver said: 8220;Reliance is excited about the opportunity to further expand presence in the Marcellus Shale in the US.

8220;The proposed joint venture with Carrizo will supplement strengths achieved through our recent joint ventures and further expand our footprint in North American shale gas operations.8221;

The 104,400 acres of acreage with the joint venture is expected to support the drilling of about 1,000 wells over the next 10 years,with a net resource potential of about 3.4 Trillion cubic feet,the statement said.

For Reliance,Jefferies amp; Co acted as lead financial advisor and Vinson amp; Elkins LLP acted as legal counsel. BNP Paribas and Credit Agricole Corporate and Investment Bank provided strategic advise.