ONGC-Petrobras swap stakes in blocks

Oil and Natural Gas Corporation (ONGC), the country's largest exploration and production company, has signed a deal with Brazil's Petrobras for exchange of stakes in oil blocks in each other's countries.

ONGC will offer Petroleo Brasileiro SA (Petrobras) stake in its deepwater oil and gas block in the Krishna-Godavari basin, in which it discovered gas reserves estimated at 5-15 trillion cubic feet.

In return Petrobras will offer ONGC Videsh Ltd (OVL) stake in oil blocks in Brazil. (According to a PTI report, quoting official sources, ONGC offered 15 per cent stake initially to Petrobras in its gas discovery blocks in Krishna-Godavari, Mahanadi and Kaveri basins. The Brazilian firm could ramp up its stake to 30 per cent later. In return, ONGC Videsh Ltd, the overseas arm of ONGC, would get 25 per cent stake in three offshore blocks in Brazil, the officials were quoted as saying)

ONGC Chairman and Managing Director RS Sharma said, "We strongly believe that the expertise of Petrobras in deepwaters will be utilised in the development of our offshore blocks in India."

Petrobras has technical expertise in ultra deep-water oil and gas production which ONGC has been looking to tap for a while now. ONGC's K-G basin gas block has water depths of over 5,500 metres, with a targeted depth of close to 6,500 metres.

Both the petroleum ministry and ONGC has often expressed concern over the company's lack of technical expertise to produce gas from such huge depths.

OVL already owns 15 per cent stake in the BC-10 block in the oil-rich Campos field in Brazil where the depth of the water ranges between 1,500 and 2,000 metres. Petrobras owns 35 per cent in that block while Shell holds 50 per cent.

This is Petrobras' first entry into India.

ONGC and Petrobras had earlier signed a memorandum of understanding to jointly participate in oil and gas exploration in Brazil, India and other countries. The present swap deal is a part of that MoU.

"The swap deal arrangement works well for us. What we need are hydrocarbon acreage and technical expertise, not finances. Petrobras gives us both," said a senior ONGC official.