Govt allows OVL to invest $70 mn more in Brazilian oilfield

The government today allowed ONGC Videsh, the overseas arm of state-run Oil and Natural Gas Corp, to invest an additional $70 million in an oilfield in Brazil, taking its total investment in the project to $748 million.

The Cabinet Committee on Economic Affairs (CCEA) has authorised OVL to make an additional investment of $70 million, taking the total cash put in BC-10 project to $383 million, Home Minister P Chidambaram told reporters here.

The $383-million investment was towards developing the oil reserves in the BC-10 block, off Brazil and did not include the $165 million OVL had paid earlier to acquire 15 per cent stake.

Oil fields in BC-10 are being developed in two phases - Phase-I cost has gone up by $314 million to $2.282 billion necessitating the additional expenditure. Phase-II cost remains same at $1.196 billion.

OVL's share at 15 per cent in the total cost would be $748.05 million, he said.

"OVL's cash sink is expected to be $383 million (excluding the acquisition cost of $165 million) against earlier estimated cash sink of $313 million," he said.

CCEA authorised the Empowered Committee of Secretaries for OVL's projects to approve an additional cash sink of $17.5 million (25 per cent of $70 million) for future use in case there were shortfalls.

Chidambaran said Royal Dutch Shell, the operator of BC-10 project, has informed OVL that the cost has gone up due to factors such as freshly imposed taxes, duties and additional well costs.

"The additional investment will give opportunity to OVL to expedite monetisation of earlier investments in BC-10 project," he said. "The additional investment is expected to provide higher reserve accretion of hydrocarbon and more production from the project to OVL, thereby increasing the energy security of the country."

BC-10 block is located in the Campos basin about 120 km southwest of Vitoria City off the coast of Brazil. Shell holds 50 per cent stake while Petrobras of Brazil has 35 per cent.

The Parque das Conchas project in the BC-10 block is estimated to contain potential oil reserves of 400 million barrels and has started producing crude oil.