Reliance in Talks to Buy into Marcellus Shale

(THE WALL STREET JOURNAL via Dow Jones), Mar. 16, 2010

Indian conglomerate Reliance Industries Ltd. is in late-stage talks to buy a big stake in a U.S. natural-gas field, according to several people familiar with the matter.

Reliance is nearing a deal to partner with Atlas Energy Inc., which controls about 584,000 acres in the expansive Marcellus Shale, a huge gas-bearing formation that stretches from West Virginia to New York. The deal would likely make Reliance the first Indian company to buy into the Marcellus, which has drawn big investments from other foreign firms.

Under the deal as considered, Reliance would pay between $1 billion and $1.5 billion to take a joint-venture stake with Atlas, which has been seeking a joint-venture partner for several months. It was not clear how the size of Reliance's stake in the deal, but Atlas is said to be seeking a 50-50 partner, said these people.

While Reliance is currently the prime player in discussions, other parties such as Sempra Energy are negotiating to be part of the deal, these people added.

Jefferies and J.P. Morgan Chase are running the sales process for Atlas.

U.S. gas fields have attracted a series of big investments from foreign companies in recent months. Earlier this month, British giant BP PLC bought a roughly $200 million stake in a south Texas gas field. In January, French oil company Total SA paid $2.25 billion for a 25% stake in another Texas gas field. Companies from Japan, Italy and Norway have also bought into U.S. gas assets.

The deals are a chance for companies to learn how to extract gas from shale formations, which until recently were considered too dense to produce commercial quantities of gas. The companies hope to take the techniques to other shale fields overseas.

Reliance, run by billionaire Mukesh Ambani, has made multiple attempts to acquire North American assets in recent months. Last month, the company bid $2 billion for a stake in Canadian oil producer Value Creation Inc., but ultimately lost out to BP PLC. Reliance also fell short in its bid to buy bankrupt chemical company LyondellBasell Industries.

Reliance's interest was reported earlier by Reuters.

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