Third time’s the charm for Mukesh Ambani

March 17, 2010

Mukesh Ambani(UPDATE: Reliance Industries has gained an overseas foothold by agreeing to pay $1.7 billion to form a joint venture with U.S.-based Atlas Energy. India’s largest-listed firm will pick up a 40 percent stake in Atlas’s operations in the booming Marcellus Shale)

The ruthless efficiency and smooth execution that marked Reliance Industries’ development of the world’s largest refining complex in western India and its vast gas fields off the country’s east coast has eluded the top-listed Indian firm during its recent attempts at overseas takeovers.

Nevertheless, Mukesh Ambani, the world’s fourth-wealthiest man and the chairman of Reliance, is known for his doggedness and is unlikely to backpedal on his overseas ambitions after being rebuffed by two overseas firms — bankrupt petrochemicals maker LyondellBasell and oil sands firm Value Creation.

A source tells us that Ambani now has his eyes set on the booming Marcellus Shale in the eastern United States, and wants to form a joint venture with Atlas Energy to develop the independent U.S. oil and gas firm’s operations in the gas project.

A deal could bring in more than $1 billion for Atlas, which will be a much smaller price than what Reliance was willing to pay for LyondellBasell, which was valued at about $14.5 billion by the Indian firm’s final offer. Lyondell rejected it saying the price was not high enough.

Analysts thought the exact opposite. They worried Reliance was overpaying for Lyondell, and were flummoxed about what synergies the company hoped to achieve by buying a bankrupt petrochemicals maker. In fact, investors in Reliance heaved a sigh of relief when the deal was called off.

Ambani seemed to have won even in defeat.

Analysts suggested Reliance target foreign oil and gas assets — many of which are on the selling block in the wake of the global financial crisis – as these would help feed the company’s massive refinery in the western Indian state of Gujarat.

If it succeeds in shaking hands with Atlas, Reliance could be treated to a tasty slice of the Marcellus Shale, which spans parts of Pennsylvania, West Virginia and New York in the United States and, according to some geologists, could hold enough natural gas to satisfy U.S. demand for a decade.

Reliance had earlier made a $2 billion offer for Canada’s Value Creation, but lost the race for the oil-sands developer to Britain’s BP. Analysts say Value Creation may not have been an ideal target anyway as oil-sands development is an expensive undertaking.

The Marcellus Shale seems a much more suitable pick by Reliance.

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