OVL increases stake in Brazilian oilfield for $529 million

OVL has also been awarded two onshore blocks in Myanmar

ONGC Videsh Ltd, the overseas arm of state-owned Oil & Natural Gas Corp (ONGC), today said it bought an additional 12% stake in a Brazilian oilfield for $529 million after blocking a Chinese entry.

OVL, which had a 15% stake in block BC-10 along with Royal Dutch Shell, exercised a pre-emption right to block China's Sinochem Group from buying a 35% interest in the oilfield from Petrobras of Brazil.

While the Indian firm will pick up a 12.08% stake, Shell will acquire the remaining 23%.

"In August 2013, Petrobras entered into a sales transaction with Sinochem for disposal of their 35% interest in BC-10 for $1.543 billion. This agreement was subject to pre-emption rights of the partners Shell and OVL," the company said in a statement.

Shell and OVL served the pre-emption notice to jointly acquire 35% on September 17.

"As a follow-up of the pre-emption notice, OVL through its affiliates has signed Sale and Purchase Agreements with Petrobras on October 11 for acquisition of 12% interest in the block, for a consideration $529.03 million," it said.

The acquisition of additional participating interest in the block is subject to approval of the Brazilian antitrust and regulatory authorities.

"On closing, OVL's stake in the block would increase to 27%," the statement added.

Block BC-10, also known as Parque das Conchas, is in the Campos Basin of Brazil and includes four offshore deep-water fields - Ostra, Abalone, Argonauta and Nautilus - and a few identified exploration prospects.

The water depth in the block ranges from 1,500 to 1,950 meters and it is located about 120 km from Vitoria town. The licence for the fields expires in December 2032.

OVL also said it has been awarded two onshore blocks in Myanmar -- B-2 (Zebyutaung-Nandaw) and EP-3 (Thegon-Shwegu).

Block B-2, with an area of 16,995 square km, is located in Northern Myanmar, bordering Manipur state in India and Block EP-3, spread over 1,650 sq km, is in Central Myanmar.

Myanmar had announced the second round of bids for 18 onshore blocks in January. OVL was one of seven Indian companies that were shortlisted as pre-qualified bidders.

OVL already has a 17% stake in the Shwe and Shwe Phyu (Block A-1) and Mya North & Mya South (Block A-3) fields in Myanmar and has invested $565 million.

"Myanmar is one of the focus countries for OVL," the statement said.

The acquisition in the Brazilian field is the first time that an Indian company has exercised pre-emption rights to block the sale of an oilfield stake to a Chinese firm.

Petrobras is shedding non-core assets to help finance a $237-billion, five-year investment plan.

OVL had acquired the 15 per cent stake in BC-10 in April 2006 for $165 million. Additionally, its share of cost of developing the 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.

The BC-10 block started production in 2009. The Ostra field in the block pumps about 21,000 barrels per day of oil.

The second-phase development is expected to start by the end of this year, with a peak production of 35,000 barrels of oil equivalent per day.