Reliance Industries said Thursday it has agreed to pay $1.3 billion for a stake in the shale gas assets of Texas-based Pioneer Natural Resources Co. as the Indian oil and gas major expands its upstream business in North America, according to AP. Reliance subsidiary Reliance Eagleford Upstream LP will pay $263 million upfront for a 45 percent interest in Pioneer's Eagle Ford shale acreage in south Texas, representing 118,000 acres of the 263,000 acre field, which Reliance says holds about 10 trillion cubic feet of gas equivalent. It is the second such deal this year for Reliance as it chases resources and expertise in promising unconventional gas reserves in North America. «This transaction represents another significant milestone in Reliance's efforts to grow its North American shale gas operations,» executive director PMS Prasad said in a statement. In April, Reliance agreed to pay $1.7 billion for a 40 percent stake in Atlas Energy's Marcellus shale acreage in West Virginia, Pennsylvania and New York States. Reliance says the 343,000 acres hold an estimated 13 trillion cubic feet of gas. Last week, chairman Mukesh Ambani told shareholders that Reliance would continue to use its considerable cash holdings to «build a substantial upstream business in North America.» Spokesman Tushar Pania said the company remains interested in further acquisitions. «If anything interesting comes up we will definitely look at it,» he said. Reliance's share of the Pioneer shale acreage adds net 4.5 trillion cubic feet of gas to the company's 8 trillion cubic feet of proven extractable gas equivalent in India. Angel Broking analyst Deepak Pareek said the deal with Pioneer seems at a reasonable price, especially given the absence of exploration risk and the potential for Reliance to gain shale gas expertise it could apply elsewhere, including India. India's state-run oil giant ONGC is doing a pilot study of India's shale gas potential, and no Indian companies currently have expertise in extracting shale gas, Pareek said. As part of the Pioneer deal, Reliance will get hands-on experience operating up to four rigs and will fund 75 percent of Pioneer's drilling costs up to $879 million, Pioneer said in a statement. Reliance will pay an additional $46 million for a 49.9 percent stake in a separate midstream processing joint venture with Pioneer. It will gather, separate and stabilize gas and gas condensate using 14 planned facilities and 250 miles of pipeline, before selling off the processed condensate to a third party. Reliance will pay Pioneer $1.15 billion and buy out a stake of Pioneer's current joint venture partner, Newpek LLC, for $210 million in a deal expected to close within five business days, Pioneer said. Pioneer is also targeting additional acreage in six south Texas counties and Reliance will have the option to buy a 45 percent share of Pioneer's new acreage. Pioneer said the cash influx will enable it to ramp up production from Eagle Ford to as much as 41,000 barrels of oil equivalent per day by 2013, from a 2010 average of 2,000 barrels a day. Last year, Irving-Texas based Pioneer reported a loss of $52.1 million on revenues of $1.7 billion. Reliance is India's largest private sector company, with a market capitalization of $75.3 billion on the Bombay Stock Exchange and net profit last fiscal year of $3.6 billion on sales of $44.6 billion.
