OVL secures offshore oil block in Brazil

Mumbai: ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corp (ONGC), has won an oil exploration block in Brazil. OVL paid $0.68 million to secure rights for the S-M-1103 offshore Santos basin block), an OVL release said.

OVL, which is participating for the first time in a Brazilian oil auction, said the new frontier block (S-M-1103) has potential for natural gas and light oil.

But it is not clear whether the winning bids in the auction will actually be valid as a federal judge had issued an injunction suspending the auction.

The court objected to Brazil's National Petroleum Agency (ANP) limiting the number of offers a bidder can make. ANP immediately appealed the decision and said it was optimistic the two-day auction would resume as scheduled.

OVL was among a host of global energy giants that were awarded six blocks in Brazil's eighth annual auction of oil and gas concessions.

Italian oil company Eni SpA and Brazil's state-run oil firm Petroleo Brasileiro SA, or Petrobras, were among the first winners in the auction.

If its bid is valid, Eni will have to pay the ANP $140 million (307 million Brazil reals) for exploration and production rights in the SM-857 block, which lies in a new frontier area in deep waters in the Santos Basin off the coast of Sao Paulo.

Petrobras won a bid for the nearby SM-855 block, for which it will have to pay 167 million Brazil reals if the bid is valid. The company also won a 33 million Brazil reals bid for the nearby SM-734 block. Both blocks are in an area that the ANP believes has high potential oil or gas deposits.

The blocks won by Eni and Petrobras are in an area that is believed to have geological characteristics similar to those of the 1-RJS-628 exploration well in the Santos-Basin BM-S-11 exploration block, where a Petrobras-led consortium in July hit light oil at a water depth of 2,140 metres, and another 5,000 to 6,000 metres below the seabed.

Petrobras last month said tests showed the existence of a "significant volume" of 30 degrees API crude at the well. Production tests at the well showed a flow of 4,900 barrels of oil a day and of 150,000 cubic meters of natural gas a day, Petrobras said. Petrobras also won bids for smaller nearby blocks.

Other foreign firms also won bids in the Santos Basin, but will have to pay far less if their bids are deemed valid.

Apart from ONGC Videsh, other foreign firms including Turkish national oil and gas company Turkiye Petrolleri Anonim Ortakligi, or TPAO, and Australia's Woodside Petroleum Ltd. ( WPL.AU), that had never participated in Brazilian oil block auctions, have also been qualified in the bidding, ANP said.

Foreign firms so far produce only a tiny part of Brazil's total oil output of about 1.8 million barrels a day, but their output is expected to rise to some 330,000 barrels a day by the end of the decade.

ANP also auctioned 28 on-land blocks in the Tucano Sul Basin in the northeastern state of Bahia.