The acquisition is part of RILs bid to tap the growing market for non-conventional energy. In April, RIL had bought 40% stake in Atlas Energy, under which the Indian company will invest $1.7 billion (around Rs 7,500 crore) in Atlass core Marcellus Shale acreage position.
Shale gasproduced from shale, a fine-grained sedimentary rockis becoming an increasingly important source of natural gas across the globe. Over the next decade, shale gas is expected to contribute to over 20% of the overall gas production in the US.
An RIL spokesperson, however, said he was not aware of any concluded deal yet. RIL shares fell 0.15% on the BSE on Tuesday to close at Rs 1,063.65, while the 30-share benchmark Sensex fell 0.71%. RIL, which has huge cash resources, does not have any problem funding large acquisitions.
RIL had cash and cash equivalents of Rs 15,960 crore as of December 31, 2009, and raised about Rs 9,240 crore by selling treasury stocks in three tranches since September last year.
Mukesh Ambani told shareholders last week at the Reliance AGM that the company was looking to build up its presence in the US shale gas business.
RIL has also been eyeing some distressed assets in the developed world. It made a $14.5-billion bid for Dutch petrochemicals company LyondellBasell Industries, but the bid was rejected this March.
The International Energy Agency (IEA) in its World Energy Outlook 2009 estimates that by 2030, global energy demand will rise 49% from its current level. Oil and natural gas are expected to remain primary energy sources, meeting 51% of global demand.
In the Pioneer deal, Reliance was represented by Barclays and UBS, while Pioneer was advised by Bank of America-Merrill Lynch, reports said.
During its Atlas acquisition, in addition to funding its own 40% of drilling obligations, RIL had agreed to fund 75% of Atlas respective portion of drilling and completion costs until the $1.36 billion drilling carry is fully utilised. Atlas and Reliance also agreed upon a five-year development plan that calls for the drilling of 45 horizontal Marcellus Shale wells for the joint venture during the remainder of 2010, increasing to 108 wells in 2011, 178 wells in 2012, and 300 wells in 2013 and 2014.
Atlas had been looking for a partner for its operations in the booming Marcellus Shale in the eastern US. Barclays Capital had advised Reliance on the Atlas deal. Shale gas is natural gas stored in organic-rich sedimentary rocks. It may be attached to or adsorbed onto organic matter. The gas is contained in difficult-to-produce reservoirs that require special completion, stimulation and/or production techniques to achieve economic production. RIL is planning to invest more than $3 billion over the next four to five years to build capacity for its entry into the fertiliser sector. The move is related to the announcement on Friday on setting up a giant coke gasification project at Jamnagar.