Petrobras to exit ONGC block, Shell keen to buy

Brazil's Petrobras has decided to quit Oil and Natural Gas Corp's (ONGC) prolific gas discovery block in the Krishna Godavari basin, a vacancy that Royal Dutch/Shell and BP Plc are keen to fill-in.

Petroleo Brasileiro SA or Petrobras, Brazil's state-controlled oil firm, wants to offload its 15 per cent stake in KG-DWN-98/2 to ONGC as it wants to concentrate on developing massive oil and gas finds back home, a top official said.

The vacancy may not last long as Shell and BP Plc have expressed interest in taking the stake in the block that sits next to Reliance Industries' giant KG-DWN-98/3 or KG-D6 block off the east coast.

Shell has offered technology to convert natural gas into liquid (liquefied natural gas) at a floating offshore facility at the deepsea and then transporting the fuel in ships to the shore. BP on the other hand has offered the conventional technology of producing gas at an offshore platform and then transporting it to land through under-sea pipelines.

"For us, Shell technology makes more sense," he said, adding, a decision to induct Shell or BP can only be taken after ONGC acquires Petrobras' shareholding in the block.

ONGC has made 10 gas discoveries, including the ultra deepsea UD-1 find in the block where Hydro Oil and Energy India BV, a unit of Norway's StatoilHydro, and Cairn India hold 10 per cent a piece. The discoveries are estimated to hold anywhere between 5 and 15 trillion cubic feet of inplace reserves.

Petrobras had an option to raise its stake to 30 per cent in the KG-DWN-98/2 block where UD-1 alone had been assessed to hold 2.08 trillion cubic feet of reserves. "They (Petrobras) has told us that it wants to withdraw to concentrate back home," the official said, adding the Brazilian firm refused to contribute to further drilling in the block.

Petrobras told ONGC that it is putting all its resources on developing finds off the Atlantic coast, including the 8 billion barrels Tupi oil find. The over $100 billion spend may allow Brazil to overtake the output of all OPEC members except Saudi Arabia.

"We don't have technology to bring the UD-1 gas find in ultra deepsea to production. Thats why we got Petrobras and Statoil," the official said.

ONGC plans to tie up gas discoveries in KG-DWN-98/2 (excluding UD-1) with the G-29, GS-4 and Vashistha gas finds in a shallow water block KG-OS-DW4 in the same KG basin. The gas finds in KG-DWN-98/2 (excluding UD-1) and three in adjacent block together hold 6.37 Tcf of inplace reserves.

Gas production may begin by 2013, he said, adding Vashistha and neighbouring S-1 discovery alone would yield 6 mmscmd of output.