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Duncan Saville's Utilico Investments, one of Infratil's largest shareholders, is building up its stake in New Zealand Oil & Gas, adding to his handful of interests in New Zealand.
A notice to the NZX shows Bermuda-registered Utilico now holds 6.5% of NZOG shares, up from 5% at the start of June.
Utilico holds more than 25 million shares in NZOG after buying steadily for the past three months and is understood to be a long-term shareholder.
NZOG shares traded at 85c yesterday.
Utilico's stated aim is to buy what it sees as undervalued shares. Forsyth Barr recently valued NZOG shares at $1.14, while Credit Suisse gave a valuation of $1.09 in May, and Goldman Sachs gave a value of 91c in the same month.
Many oil companies worth a few hundred million in this part of the world are seen as undervalued, with some suggesting there may be mergers or takeovers to build companies to a viable size of $1 billion or more.
So Saville may be building a stake in NZOG ahead of any potential mergers, a source said.
However, another industry source said there was no great need for industry rationalisation among smaller players who were doing reasonably well. The industry was well known for joint ventures to share the costs and risks to explore or develop fields.
NZOG may instead need to look for big partners to help fund further wells.
Late last month NZOG shares rose after it said early results from a review of oil and gas field Kupe suggested its estimated reserves should be increased.
NZOG holds 15% of Kupe, 30 kilometres off Taranaki, and it accounts for 70% of NZOG's revenues and about 90% of its proven reserves.
Confirmation of the figures was expected by mid-July.
However, it has been two years since NZOG actually drilled a new well, with the next two wells planned in Indonesia later this year. The next round of offshore drilling in New Zealand may not be till summer 2013/14 for NZOG.
NZOG also has exploration interests in Tunisia.
It makes up 1.6% of the Utilico portfolio and is a new entrant to the portfolio's top 10 holdings.
Utilico is also Infratil's biggest shareholder, holding about 14% of the infrastructure investment company, according to the latest annual report.