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ONGC Videsh Ltd, the overseas arm of state explorer Oil & Natural Gas Corp (ONGC), is mulling exercising its pre-emption rights to block China's Sinochem Group from buying 35% interest in Brazilian oilfields for $1.54 billion.
OVL holds 15% stake in the block BC-10, known as Parque das Conchas, where Brazilian state-controlled oil firm Petroleo Brasileiro SA or Petrobras is selling its 35% stake to Sinopec.
The Indian firm as also Royal Dutch Shell Plc, which is the operator of BC-10 with a 50% stake, holds right of first refusal or pre-emption rights. They can individually or together buy 35% stake at the $1.54 billion price agreed between Petrobras and Sinochem.
"When Petrobras put its 35% stake in BC-10 for sale, OVL evinced interest but for strategic reasons did not place a bid," a source with direct knowledge of the development 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.
"If OVL had bid - higher or lower than Sinochem's offer, it would have revealed its cards. But now, it can analyse if it is worth paying $1.54 billion to take an additional 35% stake in the block. If it makes economic sense, OVL will for sure exercise its pre-emption right and block Sinochem deal," the source said.
If OVL decides to exercise its pre-emption right, this will be the first instance of the Indian firm outdoing China. So far, OVL has lost out to many an asset to the Chinese, the last being a 8.4% stake in Kazakhstan's giant Kashagan oilfield.
OVL had struck a deal to buy ConocoPhillips' stake in Kashagan for $5 billion but Kazakhstan government blocked the deal by exercising its pre-emption right and for a small margin re-selling it to a Chinese firm.
India has lost at least $12.5 billion of deals to China in past years.
Petrobras had on Friday announced sale of its stake in oil and gas assets in Brazilian and US offshore fields to Sinochem Group for $2.1 billion. The biggest among these was $1.54 billion for 35% stake in BC-10, where the Ostra field pumps about 21,000 barrels per day of oil.
The transaction is subject to third party pre-emptive rights.
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).
