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In a first by an Indian firm, ONGC Videsh Ltd (OVL) has exercised its pre-emption rights to block China's Sinochem Group from buying 35% interest in a Brazilian oilfield for $1.54 billion.
OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), in collaboration with Royal Dutch Shell will buy the 35% stake in block BC-10, known as Parque das Conchas, that Brazil's Petrobras had planned to sell to Sinochem, sources with direct knowledge of the development said.
While the Indian firm will pick up 12.08% stake, the remaining 23% will go to Shell.
Sources said OVL-Shell, who by virtue of their existing stake in BC-10 had a first right of refusal or pre-emption when fellow participants offer stakes for sale, have informed Petrobras about their decision.
OVL currently has a 15% stake in the block which is entitled for an extra 8% taken from the 35% stake being sold by Petrobras. Shell is the operator with 50% share.
But, OVL manged 12.08% after convincing Shell to take a smaller than its entitled stake, sources said.
OVL Managing Director D K Sarraf declined to comment citing confidentiality in the joint operating agreement (JOA).
This is the first time an Indian firm 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. Last month, it agreed to sell its stake in block BC-10, known as Parque das Conchas, in Brazil's Campos Basin, for $1.54 billion to Sinochem Group.
OVL, a few weeks back, lost out on acquisition of US energy major ConocoPhillips' 8.4% stake in Kazakhstan's giant Kashagan oilfield for $5 billion.
Kazakhstan first exercised its pre-emption right to block the OVL deal and then sold the 8.4% stake to China National Petroleum Corp (CNPC).
India has lost at least $12.5 billion of deals to China in past years.
OVL had acquired 15% stake in BC-10 in April 2006 for $165 million. Additionally, its share of cost of developing field is $748.05 million, of which $383 million has already been spent. The first two phase of the project are estimated to cost $4.987 billion (OVL's share of 15% bring $748.05 million).
The BC-10 block off Brazil lies in ultra-deep water of 2,000 metres and began production in 2009. The Ostra field in the block pumps about 21,000 barrels per day of oil.
A 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.
"When Petrobras put its 35 per cent stake in BC-10 for sale, OVL evinced interest but for strategic reasons did not place a bid," a source said.
Shell too did not put a bid for the stake and unlike OVL, it did not even visit the dataroom Petrobras had set up to lure potential buyers.
