OVL blocks Chinese bid, buys stake in Brazilian oilfield

ONGC Videsh (OVL) has exercised its pre-emption rights to block China's Sinochem Group from buying 35 per cent interest in a Brazilian oilfield for $1.54 billion.

OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), in collaboration with Royal Dutch Shell will buy the 35 per cent stake in block BC-10, known as Parque das Conchas, that Brazil's Petrobras had planned to sell to Sinochem, sources with direct knowledge of the development said.

While the Indian firm will pick up 12.08 per cent stake, the remaining 23 per cent will go to Shell.

The BC-10 block off Brazil lies in ultra-deep water of 2,000 metres and began production in 2009. The Ostra field in the block pumps about 21,000 barrels per day of oil.

Petrobras is shedding non-core assets to help finance a 237-billion, five-year investment plan. Last month, it agreed to sell its stake in block BC-10, known as Parque das Conchas, in Brazil's Campos Basin, for 1.54 billion to Sinochem Group.

Sources said OVL-Shell - who by virtue of their existing stake in BC-10 had a first right of refusal, or pre-emption, when fellow participants offer stakes for sale - have informed Petrobras about their decision.

This is the first time an Indian firm has exercised pre-emption rights to block the sale of an oilfield stake to a Chinese firm.

OVL currently has a 15 per cent stake in the block and is entitled for an extra 8 per cent taken from the 35 per cent stake being sold by Petrobras. Shell is the operator with 50 per cent share. But, OVL managed 12.08 per cent after convincing Shell to take a smaller than its entitled stake, sources said.

OVL had acquired 15 per cent stake in BC-10 in April 2006 for $165 million. Additionally, its share of cost of developing field is $748.05 million, of which $383 million has already been spent. The first two phases of the project are estimated to cost $4.987 billion (OVL's share of 15 per cent bring $748.05 million).

OVL Managing Director DK Sarraf declined to comment, citing confidentiality in the joint operating agreement (JOA).

The company had, a few weeks back, lost out on acquisition of US energy major ConocoPhillips' 8.4 per cent stake in Kazakhstan's giant Kashagan oilfield for $5 billion.

Kazakhstan first exercised its pre-emption right to block the OVL deal and then sold the 8.4 per cent stake to China National Petroleum Corp (CNPC).

India has lost deals worth at least $12.5 billion to China in the past.

With inputs from PTI