India firm buys another major stake in shale drilling region

A giant Indian industrial concern has bought a second stake of natural-gas acreage in Pennsylvania, underscoring the international scope of the Marcellus Shale boom.

Reliance Industries Ltd., which bills itself as India's largest private-sector company, said Thursday that it would pay $392 million to acquire a 60 percent stake in 104,400 Marcellus acres in central and northeastern Pennsylvania.

The acreage is now controlled by a 50-50 venture of Carrizo Oil & Gas Inc., a Houston, Texas, exploration company, and Avista Capital Partners, a private equity firm. Under the new joint venture, Reliance will own a 60 percent interest, and Carrizo will own 40 percent. Carrizo will be the operator of the wells.

Though Carrizo is active in north Texas - it is developing shale-gas wells on the campus of the University of Texas-Arlington - it has drilled only one well in Pennsylvania, according to state records.

But Carrizo's drilling activity in Susquehanna and Wyoming Counties will accelerate in the next two years because the Reliance investment includes $52 million to cover 75 percent of the well-development costs. Carrizo chief executive S.P. "Chip" Johnson IV told analysts on Thursday that Reliance has a "big appetite to drill shale wells."

Reliance estimates the potential Pennsylvania resource at 3.4 trillion cubic feet of gas and said it expected to drill 1,000 wells in the area over the next decade.

The company already has invested $3 billion this year in the purchase of shale-gas assets in Pennsylvania and Texas from Atlas Energy Inc. and Pioneer Natural Resources Co.

ExxonMobil, Royal Dutch Shell, and investors from France, Norway, and Japan also have rushed into the Marcellus Shale, which lies under much of Pennsylvania and parts of four other states.

Aided by a controversial drilling technique, exploration companies have dramatically increased production in unconventional geologic formations such as shale.

Reliance appears to be picking up expertise in unconventional gas development ahead of India's plans to offer shale-gas areas for exploration next year.