Reliance Industries Gets Major Investment from BP, What Does it Mean for Marcellus Shale?

India’s largest private sector company, Reliance Industries Limited (RIL), has appeared prominently in the news for the past couple of days. And there’s a tie-in with the Marcellus Shale. Here’s the highlights:

Last year, RIL made a major investment in a joint venture with Atlas Energy, buying 120,000 net acres of Marcellus Shale leases (and drilling operations) for $1.7 billion, which was 40% of Atlas’ Marcellus acreage. A big investment to be sure. The terms of the deal, which are somewhat complex, mean that RIL will invest another $3.5-$4.4 billion over the course of 10 years in the Atlas joint venture. But now Atlas is gone and RIL has a new partner in the Marcellus. Atlas decided to sell itself to Chevron for $4.3 billion. That deal officially closed yesterday. RIL was miffed. They made a bid for Atlas but their bid was turned down. So now RIL and Chevron will work together to develop the Marcellus Shale play.

Last week RIL held a conference call for stockholders, outlining its plans to invest $30 billion over the next five years on its five lines of business. One of those lines is exploration and production of oil and gas. Of the $30 billion, RIL will invest one-third ($10 billion) on E&P. That’s for worldwide operations, including its commitment to the Marcellus Shale.

And just yesterday we have word that BP is investing in RIL (have a headache yet trying to follow this?). BP is taking a 30 percent stake in 23 of RIL’s oil and gas blocks, and is paying RIL an initial $7.2 billion for it, although in time depending on production, the payment may go as high as $20 billion. Yikes! Most of BP’s investment has to do with the Indian market itself—which is growing at an astonishing rate, 120 percent growth in Indian energy consumption the past 20 years, and projected to be 115% growth for the next 20 years. RIL will rely on BP’s expertise in off-shore drilling to expand its own off-shore operations. But no doubt some of that BP money will find its way into funding RIL’s Marcellus Shale ventures as well.

Bottom line: RIL is on the move in exploration & production, in a big way. And one of the things they have their eye on is the Marcellus Shale. They’ve made a major commitment to the Marcellus, and MDN believes we have not seen the end of that commitment yet. Look for RIL to invest in more Marcellus Shale acreage in the coming months.

RIL Press Release (Feb 17) – RIL lines up $30-bn investment over next five years news

RIL Press Release (Feb 21) – BP and Reliance Industries Announce Transformational Partnership in India (PDF)

New York Times (Feb 21) – BP to Pay $7.2 Billion for Stake in Oil Fields in India