June 22, 2010 / 6:10 AM / 8 years ago

UPDATE 3-Reliance to buy Pioneer shale stake-sources

* Reliance to invest $1.35 bln - sources

* To pay $300 mln in cash, rest in capex over 4 yrs- source

* To get 45 pct of Pioneer Eagle Ford shale assets

* Reliance has been looking to build U.S. shale gas business

* Reliance shares close slightly lower, Pioneer down 6 pct

By Tony Munroe and Michael Erman

(Changes sourcing, adds detail from Pioneer)

MUMBAI/NEW YORK, June 22 (Reuters) - India’s Reliance Industries (RELI.BO), building its presence in the U.S. shale gas sector, was close to announcing a deal to pay $1.35 billion for a stake in shale assets controlled by Pioneer Natural Resources (PXD.N), sources familiar with the matter told Reuters on Tuesday.

Reliance, India’s largest listed company, will buy a 45 percent stake in Pioneer’s Eagle Ford shale acreage in south Texas, they said. The energy-based conglomerate will pay $300 million in cash and the remainder in capital expenditure over four years, one of the sources said.

Both sources declined to be identified.

Companies from around the globe are increasingly investing in U.S. shale plays -- underground rock formations that hold reserves of oil and natural gas.

Shale gas accounts for between 15 percent and 20 percent of U.S. gas production but is expected to quadruple in coming years, touching off a scramble among producers large and small for access to resources.

The Eagle Ford shale is seen as an especially attractive prospect as it is believed to be rich in natural gas liquids and condensates, which command higher prices than regular natural gas.

The deal was likely to be announced on Wednesday, one of the sources said, and would be the second of its kind in recent months for Reliance, which is controlled by the world’s fourth-richest person, Mukesh Ambani.

    In April, Reliance agreed to pay $1.7 billion to Atlas Energy ATLS.O to form a joint venture and own a 40 percent stake in Atlas’ Marcellus Shale operations in the eastern United States. [ID:nN09123890]

    A Reliance official declined to comment.

    Pioneer has said that it is seeking a JV partner for its Eagle Ford shale assets and that it hopes to announce that partner by the end of June. It declined to comment further on the matter.

    Ambani said last week Reliance was looking to build up its presence in the U.S. shale gas business.

    Reliance is also making a push into the power and telecoms sectors now that it is no longer constrained by a pact that forbade it from competing in industries where Ambani’s long-estranged brother, Anil Ambani, is also present.

    Earlier this month, two sources familiar with the matter told Reuters that Reliance was in talks to buy a stake in Pioneer’s shale gas assets, and was also in talks with several other firms to acquire similar assets.

    Reliance was represented by Barclays (BARC.L) and UBS UBSN.VX(UBS.N), while Pioneer was advised by Bank of America Merrill Lynch (BAC.N), sources said.

    Shares in Reliance, the biggest constituent in the Sensex .BSESN index, ended 0.15 percent lower on Tuesday in Mumbai, while Pioneer shares traded 6 percent lower in New York. (Reporting by Tony Munroe and Indulal P.M. in Mumbai and Michael Erman in New York; Editing by Phil Berlowitz)

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