ONGC close to equity tieup with Petrobras

Exploration major Oil and Natural Gas Corporation (ONGC) and the Brazil-based Petrobras have moved one step closer to an equity partnership for deepwater oil and gas blocks in India and Brazil.

During a joint working group meeting yesterday, ONGC agreed to allow Petrobras to view data regarding nine offshore blocks for a possible stake buy by the Brazilian company.

"The blocks are spread across the country, but primarily concentrated in the Krishna-Godavari and Mahanadi basins. Petrobras is keen on the Krishna- Godavari basin," said a senior ONGC official, who did not want to be named.

"Petrobras is going big on India," the official added.

The Brazilian company has shown interest in 27 deepwater blocks operated by ONGC. Some of these blocks include those won by ONGC in the sixth round of auction under the New Exploration and Licencing Policy (NELP VI).

The first joint working group meeting between the two companies was attended by Petrobras' Executive Manager (exploration & production) Francisco Nepomuceno Filo. ONGC and Petrobras had signed a memorandum of understanding for a joint exploration and production work on September 12, 2006.

"Evacuation of oil and gas from deepwater blocks demands high technical knowledge, and Petrobras specialises in deepwater exploration and production. We want their technology," the ONGC official said.

ONGC has recently discovered huge reserves of gas in the UD-1 block in the ultra deepwater Krishna-Godavari basin about 55 kms off the coast of Andhra Pradesh. The company has troubles with the upstream regulator, Directorate General of Hydracabons, over gas assessment and testing.

"Petrobras will give us expertise which would help us avoiding similar run-ins with the regulator," the official said. Recently, ONGC's Director (exploration) DK Pande had told Business Standard that the company was in talks with various overseas companies, including Petrobras and British Petroleum, for possible farm-in opportunities in its offshore blocks.

ONGC has often come under the government's scanner for its poor recovery rate of crude oil. The company's average recovery rate is just 28 per cent compared with the world average of around 45 per cent.

ONGC and Petrobras are likely to enter into a swap deal where Petrobras will be offered stake in oil blocks in India and in return will offer ONGC stake in oil blocks in Brazil. ONGC, thorough its overseas investment arm ONGC Videsh, already owns 15 per cent stake in a block in the BC-10 block in Brazil.