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Chevron buys Atlas Energy, takes over RIL JV

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RIL will continue to fund 75% of the operator’s drilling costs.

Chevron Corp’s decision to buy producer has brought the two former partners – Chevron and Ltd (RIL) – together, after the American company had exited in April last year.

Chevron will take over Atlas’s role as the operator of a joint venture in the Marcellus shale gas assets, with RIL having 40 per cent stake (or approximately 137,000 acres) in the project. RIL will continue to fund 75 per rcent of the operator’s drilling costs, of up to $1.4 billion.

In April this year, Atlas Energy had entered into a joint venture with RIL to develop the Marcellus assets. Under the agreement, RIL holds 40 per cent stake of the 343,000 acres shale gas project, spaning parts of Pennsylvania, West Virginia and New York. RIL was to invest $1.36 billion to develop the resources and Atlas was the operator.

The agreement between Chevron and Atlas states that the former will assume Atlas Energy’s role as the operator with 60 per cent participation in the Marcellus joint venture, under the original agreement terms between Atlas Energy and RIL.

“Chevron buying out Atlas is certainly a positive for Reliance Industries. For, RIL will get a partner like Chevron in the Marcellus shale gas joint venture who has deep pockets and world class technology in developing shale gas assets. For companies like Atlas, they would have bought these shale assets pretty early and it was evident that they would be selling out at later stage,” said an analyst from a leading consulting firm, requesting anonymity.

In 2006, Chevron had acquired five per cent stake in Reliance Petroleum for around $300 million, before the Indian company went for a mega IPO of over Rs 8,100 crore. The share sale agreement between the two companies had also given Chevron the option to buy an additional 24 per cent on conclusion of certain “collaboration agreements” under which the US firm was supposed to provide 35 per cent of the crude oil requirements of the new Jamnagar refinery and buy 45 per cent of the refined products for 10 years. However, the company exited Reliance Petroleum in April last year after selling the stake at the acquisition cost.

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