Reliance Said to Consider Buying Pioneer Shale Gas Assets Stake

June 11 (Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, is considering buying a stake in shale gas assets owned by Pioneer Natural Resources Co. in the U.S., two people with knowledge of the matter said yesterday.

The Irving, Texas-based company said last month it expects to announce a joint venture to accelerate its Eagle Ford Shale development by the end of the second quarter. Pioneer shares climbed 6.7 percent yesterday to $68.87, the highest since July 15, 2008. The Standard & Poor’s 500 Index rose 3 percent.

Reliance, which acquired a stake in shale gas assets in the U.S. from Atlas Energy Inc. in April for $1.7 billion, is joining Royal Dutch Shell Plc and Exxon Mobil Corp. in buying unconventional gas reserves in anticipation prices for the cleaner-burning fuel will recover. Shale-gas deposits weren’t considered worth tapping before Houston billionaire George P. Mitchell pioneered new extraction techniques in the 1990s.

“Shale gas is the big energy play and everyone wants to be there,” said Juergen Maier, who helps manage 1.1 billion euros ($1.3 billion) of assets, including Reliance shares, at Raiffeisen Capital Management in Vienna. “Reliance has the cash flowing in now and it makes sense to grow inorganically and become a global player.”

Unconventional gas is the industry term to describe the fuel trapped in shale formations, coal beds and impermeable sandstone rock. BP Plc Chief Executive Officer Tony Hayward described shale gas as a “game changer” after it allowed the U.S. to overtake Russia in total gas production last year.

Cash Reserves

Reliance, the Mumbai-based energy explorer and oil refiner controlled by Asia’s richest man, Mukesh Ambani, had cash and equivalents of 218.7 billion rupees ($4.7 billion) as of March 31, the company said April 24.

Shares in Reliance rose 0.8 percent to 1,015.35 rupees in Mumbai trading yesterday, compared with a 1.6 percent gain in the benchmark Sensitive Index. The stock has declined 12 percent in the past year.

Pioneer has about 310,000 acres of at the Eagle Ford Shale Play in south Texas, according to its website. The company’s first successful well tested in October 2009 and second one in January this year.