India's Richest Man Hunts for Shale Gas

NEW YORK (TheStreet) -- India's Reliance Industries plans to buy a 45% stake in a Texas shale gas field owned by Pioneer Natural Resources(PXD). Interestingly, this deal follows a few other deals Reliance has made during the past two weeks and management's announcement of doubling the enterprise value within a decade.

Reliance will pay $1.35 billion, spread over four years, to acquire the Texas shale gas field. Pioneer has about 310,000 acres in this Eagle Ford Shale play in South Texas. This deal would be the company's second purchase of a U.S. shale gas interest in two months. In April, Reliance bought a 40% stake in Atlas Energy's(ATLS) Marcellus shale gas operations, gaining access to 343,000 acres estimated to hold 13 trillion cubic feet of gas.

"We will continue to pursue such joint development opportunities with the best operators as well as on our own to build a substantial upstream business in North America," said Reliance Chairman Mukesh Ambani, India's richest man, during the company's annual general meeting last week.

He added, "Shale gas is the most promising development in the energy area in North America. It is likely to overtake both conventional gas as well as liquid fuels as a source of energy within the next decade. Shale gas development represents a low level of geological risk as the gas is trapped in rock across a wide geographical region in excess of tens of millions of acres."

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The shale gas market in the U.S. has been examined for deals recently since shale gas has become economically viable to extract following upgrades in drilling technologies. Estimates for the U.S. shale gas reserves have been revised upwards from 30 years to over 100 years, at the current consumption levels. Shale gas is produced from a common rock formation by pumping water and sand.

World oil majors ExxonMobil(XOM) and Royal Dutch Shell(RDS.A) have joined the shale gas hunt. Exxon acquired XTO Energy(XTO), the shale gas specialist, for a record $41 billion in December 2009. Royal Dutch Shell has increased its holdings in U.S. shale gas acreage by expanding its holdings in East Resources for $4.7 billion.