The Hindu Business Line : ONGC to team up with Petrobras

The deal
OVL is picking up 15 per cent stake in Brazilian oil field BC-10 block.
The shareholdings in the partnership, once all the formalities are completed and approved by Brazil's National Petroleum Agency, will stand at Shell 50 per cent, Petrobras (35 per cent) and OVL (15 per cent).

New Delhi , Sept. 12

ONGC is set to ink an understanding with Petrobras and the Brazilian Government to mark the entry of ONGC Videsh Ltd (OVL) into that country. OVL is picking up 15 per cent stake in Brazilian oil field BC-10 Block.

This, according to sources, could be ratification of the agreement entered into by OVL and Royal Dutch/Shell for the transfer of 15 per cent stake to the Indian company.

Earlier, this year OVL had entered into a shareholder agreement with Shell, which assigned 15 per cent stake in BC-10 to the former. The shareholdings in the partnership, once all the formalities are completed and approved by Brazil's National Petroleum Agency, will stand at Shell 50 per cent, Petrobras (35 per cent) and OVL (15 per cent).

In April, ONGC had said that OVL had originally bought ExxonMobil's 30 per cent stake in BC-10 for $330 million. It had committed another $490 million as its share of development cost. However, Shell, as the operator of the block, had the first right of refusal on any stake sale in the venture by partners. It exercised its pre-emption right and now, OVL is buying half of that stake. Shell continues to be the operator of the field.

As per estimates, the field holds 400 million barrels of oil reserves and has potential to produce 1,00,000 barrels per day. While sources remained non-committal on the finances involved, indications are that OVL would pay about $170 million for buying a 15 per cent stake in a Brazilian oil field from Royal Dutch/Shell. OVL planned to spend another $234 million as its share of the cost involved in bringing the field to production by the end of 2009.

Shell, Petrobras and ONGC will continue to analyse options for the development of BC-10. The project has entered the front-end engineering design phase and a high-level development concept has been selected which includes an FPSO and sub-sea systems to produce the discoveries in the block.