Brazilian firm wants to concentrate on gas finds back home
Brazil’s Petrobras has decided to quit Oil and Natural Gas Corporation’s (ONGC’s) prolific gas discovery block in the Krishna Godavari basin, a vacancy that Royal Dutch/Shell and BP Plc are keen to fill in.
Petroleo Brasileiro SA or Petrobras, Brazil’s state- controlled oil firm, wants to offload its 15 per cent stake in KG-DWN-98/2 to ONGC, as it wants to concentrate on developing massive oil and gas finds back home, a top official said.
The vacancy may not last long, as Shell and BP Plc have expressed interest in taking stake in the block that sits next to Reliance Industries’ giant KG-DWN-98/3 or KG-D6 block off the east coast.
Shell has offered technology to convert natural gas into liquefied natural gas at a floating offshore facility at the deep sea and then transporting the fuel in ships to the shore. BP, on the other hand, has offered the conventional technology of producing gas at an offshore platform and then transporting it to land through under-sea pipelines.
“For us, Shell technology makes more sense,” he said. A decision to induct Shell or BP can only be taken after ONGC acquires Petrobras’ shareholding in the block.
ONGC has made 10 gas discoveries, including the ultra deep sea UD-1 find in the block, where Hydro Oil and Energy India BV — a unit of Norway’s StatoilHydro — and Cairn India hold 10 per cent apiece.
The discoveries are estimated to be anywhere between 5 trillion cubic feet and 15 trillion cubic feet of reserves.
Petrobras had an option to raise its stake to 30 per cent in the KG-DWN-98/2 block, where UD-1 alone had been assessed to hold 2.08 trillion cubic feet of reserves.
“(Petrobras) has told us that it wants to withdraw, to concentrate back home,” the official said, adding the Brazilian firm refused to contribute to further drilling in the block.
Petrobras told ONGC that it was putting all its resources on developing finds off the Atlantic coast, including the 8 billion barrels Tupi oil find. The $100 billion spend may allow Brazil to overtake the output of all OPEC members, except Saudi Arabia.
“We don’t have technology to bring the UD-1 gas find in ultra deep sea to production. That’s why we got Petrobras and Statoil,” the official said.
ONGC plans to tie up gas discoveries in KG-DWN-98/2 (excluding UD-1) with the G-29, GS-4 and Vashistha gas finds in a shallow water block KG-OS-DW4 in the same KG basin. The gas finds in KG-DWN-98/2 (excluding UD-1) and three in adjacent block together hold 6.37 Tcf of inplace reserves.
Gas production may begin by 2013, he said, adding Vashistha and the neighbouring S-1 discovery alone would yield 6 mscmd of output.
Overall gas production from the integrated project is estimated at 25 mscmd.
Without UD-1, KG-DWN-98/2 block is assessed to hold just over 5 Tcf of inplace gas reserves.
“We plan to drill six appraisal well in KG-DWN-98/2 block and three in KG-OS-DW4. Following this, we will prepare a detailed development plan,” the official said. “As of now, we think we will need 58 wells to produce the oil and gas planned for the fields.”
The block was awarded to Cairn Energy India Ltd (CEIL) in the first round of bidding under New Exploration Licensing Policy (Nelp) in 1999. CEIL sold 90 per cent of the stake in the block to ONGC in 2004.
ONGC gave stakes to Petrobras and StatoilHydro to get their world-renowned expertise in deep sea exploration. “We have found gas in the ultra deep sea in the block. India does not have technology to exploit that, so foreign partners were roped in,” the official said.
Petrobras has technical expertise in ultra deep-water oil and gas production, which ONGC has been looking to tap for a while now. The block lies in water depths of over 5,500 metres.
