Reliance Industries Ltd. (500325.BY) Thursday agreed to buy a 60% stake in a shale gas joint venture with Houston-based Carrizo Oil & Gas Inc. (CRZO) for $392 million, its third such investment in the U.S. this year.

Reliance, India's largest company by market value, has been actively diversifying its exploration portfolio into shale gas, which has attracted major investments from energy giants such Royal Dutch Shell PLC (RDSB) and BG Group PLC (BRGYY) this year.

The company plans to build a significant position in the shale gas business as it presents a low level of geological risk because the gas is trapped in rock across a wide area, Reliance's Chairman, Mukesh Ambani, said at an annual shareholders meeting on June 18.

Ambani also said shale gas is likely to overtake conventional gas and liquid fuels as a source of energy in the next decade and that Reliance will commit investments with low-cost operators to expedite the resource's development.

Analysts say shale gas production has recently become economically viable due to advances in extraction technology, which is attracting several players into the field.

In its latest deal, Reliance said it will buy the stake in the Marcellus Shale acreage in central and north-east Pennsylvania through its Reliance Marcellus II LLC unit.

The deal comprises $340 million in cash and $52 million in drilling carry obligations, which include Carrizo's share of development costs over a two-year development program.

The transaction is expected to close by mid-September.

"The proposed joint venture will supplement strengths achieved through our recent joint ventures and further expands our footprint in North American shale gas operations," said Walter Van de Vijver, Reliance's president in charge of international exploration and production business.

The joint venture will have about 104,400 net acres with a net resource potential of about 3.4 trillion cubic feet equivalent, of which Reliance will have a 60% interest. This acreage is expected to support the drilling of about 1,000 wells in the next 10 years.

The shale acreage is currently owned equally by Carrizo and ACP II Marcellus LLC, an affiliate of Avista Capital Partners.

Reliance will acquire all of Avista's interest and 20% of Carrizo's stake, leaving Carrizo with 40% in the new joint venture.

Shares of Reliance were unmoved by Thursday's deal, remaining unchanged at INR1,015.15 in afternoon trading, in line with a flat Mumbai market.

"We believe that given the joint venture size, we do not expect the deal to add significantly to the overall valuation of Reliance," Saeed Jaffery, analyst at Mumbai-based Ambit Capital, said in a note.

Reliance's previous shale gas investments were much larger.

In April, Reliance bought a 40% stake in U.S.-based Atlas Energy Inc.'s (ATLS) Marcellus Shale acreage in a deal valued at $1.7 billion, while in June it purchased a 45% stake in Pioneer Natural Resources Co.'s (PXD) Eagle Ford shale natural gas asset in Texas for $1.3 billion.

In recent years, North American independent gas producers have learned how to crack the tight rock formations known as shale using streams of water and chemicals.

The development has lured international companies such as Reliance, Europe's Total S.A., BP PLC and Statoil ASA and Japan's Mitsui & Co. into the U.S., leading to new investments.

Earlier this year, Shell acquired East Resources, with control of 1.05 million net acres of shale gas, acreage for $4.7 billion and BG Group bought a 50% stake in shale assets of EXCO Resources Inc. (XCO) for $950 million. Both were in Marcellus shale.

Reliance, India's largest private sector explorer, said that under its latest shale venture, Carrizo will be the operator for the joint venture and Reliance has the option to act as operator in certain regions in coming years.

Jefferies & Co., BNP Paribas and Credit Agricole Corporate and Investment Bank, Vinson & Elkins LLP advised Reliance on the deal.

-By Eric Yep and Santanu Choudhury, Dow Jones Newswires; 91-22-6145-6110; eric.yep@dowjones.com
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