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India's Richest Man Hunts for Shale Gas

Reliance Industries, led by India's richest man, is poised to buy a 45% stake in a U.S. shale gas field.

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) - Get Report. 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."

More on Natural Gas Dicker: Natural Gas Stock Buys

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) - Get Report

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.

European energy giants,

BP

(BP) - Get Report

,

Statoil

(STO)

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and

Total

(TOT) - Get Report

, have struck deals with

Chesapeake Energy

(CHK) - Get Report

.

Reliance on a Roll

Following recent scrapping of a non-compete agreement between Mukesh Ambani, and younger brother, Anil Ambani, Reliance announced deals to enter the power and telecommunication businesses.

In a dramatic development on June 11, within hours of conclusion of India's broadband wireless access auction, Reliance announced it bought a 95% stake in

Infotel Broadband Services

paying $1.02 billion. Infotel emerged the pan-India winner succeeding in gaining a slot in all the 22 circles for an overall bid price $2.74 billion. During this auction,

Qualcomm

(QCOM) - Get Report

paid a whopping $1.04 billion for the four circles including Delhi and Mumbai.

Currently, Reliance is negotiating with

Mahanagar Telephone

(MTE)

to market the state-run firm's 3G services as a franchisee. In addition, the company has plans to invest around $1 billion in broadband wireless services over the next two years.

Reliance plans to invest over $15 billion over the next decade in power transmission projects. The company plans to bid for three ultra-mega power projects of 4,000 MW capacities each. In parallel, the company is accessing coal mines in Australia, Indonesia, and South Africa, the

three biggest coal exporting nations

. Besides, Reliance is also looking for inorganic growth options by acquiring hydel and thermal power projects.

Reliance owns the world's biggest refinery complex and India's largest gas field. In an effort to expand its operations, the company made an abortive attempt to buy Houston-based bankrupt petrochemical company

LyondellBasell

earlier this year. Reliance has cash and a cash equivalent of more than $6 billion, mostly accumulated for this deal, and a projected annual cash flow of $7 billion to $8 billion.

Reliance is the largest Indian company by market capitalization of 3.47 trillion Indian rupees ($75 billion). The company's stock has a 13.8% weight on the

BSE Sensex

, the 30-share value-weighted index.