ONGC, Petrobras kick off swap deal talks

Oil and Natural Gas Corporation (ONGC), the country's largest upstream company, has entered into talks with Brazil's Petrobras for offering each other stake in their oil and gas blocks.

ONGC is likely to offer Petrobras stake in a block in deepwater Krishna-Godavari basin in which it recently discovered gas. In return Petrobras is expected to offer ONGC stake of an equal value in blocks in the Campos basin off Brazil's coast.

ONGC Videsh, ONGC's overseas investment arm, already owns a 15 per cent stake in an offshore block in Brazil.

"We are talking to several overseas companies, including Petrobras, British Petroleum and Shell, for our block in the K-G basin," ONGC's Director (exploration) D Pande said.

The global energy giants stayed away from the sixth round of auction of oil and gas blocks under the New Exploration and Licencing Policy.

They now seem to be interested in putting their money into proven discoveries in Asia's second largest energy consuming country.

ONGC recently discovered a 30 metre gas-bearing zone in the K-G basin at a depth of 5,300 metres in the Bay of Bengal. It is currently drilling another 1,000 metres to ascertain the extent of its gas find.

Initial estimates indicate reserves of around 22 trillion cubic feet (tcf), the largest in the country so far. "Tests, including 3D studies are still on. A final figure of the reserves will be announced before March this year," Pande said.

While, ONGC officials accept that the reserves from the KG-DWN-98/2 block is "significant", there is no official figure to the reserves yet.

However, evacuating the gas from depths of over 6,000 metres needs high technology, for which expertise is needed from companies like Petrobras, Pande said."Petrobras has the kind of expertise needed to explore and evacuate gas from ultra deep water and we are actively looking at a tie-up with them for our KG basin block," said another senior ONGC executive.

The ministry of petroleum and natural gas has been disappointed with ONGC regarding its poor recovery rate of oil and gas from its blocks. ONGC's recovery rate is just 28 per cent, in comparison to almost 45 per cent recovery that companies like Norsk Hydro of Norway manage.

The oil ministry has asked ONGC to increase its recovery rate to international standards. "Technology is a major part of increasing recovery. Ultra-deepwater technology is something that Petrobras possess," a senior ONGC official said.