Mumbai: Indian energy major Reliance Industries is in talks to buy a stake in the shale gas assets of US-based Pioneer Natural Resources, two sources familiar with the matter said on Thursday.
Reliance, India’s largest listed conglomerate controlled by billionaire Mukesh Ambani, is also talking to several other firms for buying shale gas assets, the sources said. They declined to be named as they were not authorized to speak to the media.
Pioneer said last month it was pursuing a joint venture to accelerate the development of its Eagle Ford Shale operations, with an announcement expected by the end of the second quarter.
The purchase value or the size of the stake in a potential deal with Pioneer have not yet been finalized, one of the sources said.
Reliance declined to comment, while Pioneer did not immediately return calls seeking comment.
Pioneer owns about 310,000 gross acres in the prospective in the Eagle Ford shale play in southern Texas, according to the company’s website.
The Eagle Ford Shale is seen as an attractive prospect as it is rich in natural gas liquids and condensates, which command higher prices than regular natural gas.
In April, Reliance bought a 40% stake in the Marcellus Shale operations of Atlas Energy for $1.7 billion, to form a joint venture at one of the most promising natural gas deposit regions in the United States.
Companies from across the globe are increasingly investing in shale plays that are expected to be very lucrative. Shale gas accounts for between 15% and 20% of US gas production, but is expected to quadruple in coming years, touching off a scramble among producers large and small for access to resources.
But shale gas is harder and more expensive to extract because it comes from rock rather than traditional reservoirs.
Drilling could also become more expensive due to environmental challenges. Environmentalists say the drilling fluids that crack the rock and free the gas can contaminate drinking water. The industry disputes this.
Reliance has been working hard to expand its presence outside India, break into new markets and broaden its various businesses including refining, oil and gas exploration and petrochemicals.
Chairman Mukesh Ambani, the world’s fourth-richest man with an estimated fortune of $29 billion, was freed to enter sectors such as telecom and finance after ending a pact last month with his long-estranged brother Anil Ambani that prevented them from competing on each other’s turf.
Shares in Pioneer were trading up 3.1% on the New York Stock Exchange, while Reliance had closed up 0.9% in Mumbai on Thursday.