ONGC, Shell may block China's Sinochem's Brazilian offshore oil block bid

Oil & Natural Gas Corp (ONGC) and Royal Dutch Shell may exercise their pre-emption rights for the 35-per cent stake that Petrobras is selling in a producing Brazilian offshore oil block to China's Sinochem Group for $1.54 billion.

In August, state-run Petrobras agreed to sell its 35-per cent stake in Block BC-10, also known as Parque das Conchas, to Sinochem for $1.54 billion in cash.

Shell is the operator in the block with 50 per cent stake, while Petrobras holds 35 per cent and ONGC's Brazilian subsidiary ONGC Campos Ltd holds 15 per cent.

For Petrobras, the sale is part of its plan to sell non-core assets in order to fund its $237-billion, five-year investment plan.

ONGC and Shell have 30 days from 17 August to exercise their pre-emption rights, the date that Petrobras announced its intention of selling its stake to Sinochem.

Citing two unidentified sources, Reuters reported that both ONGC and Shell plan to exercise their right of first refusal with the Anglo-Dutch giant raising its stake by 20 per cent to 25 per cent, and OVL taking another 10 per cent and 15 per cent.

Block BC-10 located around 74 miles off the southern coast of Espirito Santo state with a water depth of nearly 1.2 miles, contains the Ostra, Abalone, Nautilus, Argonauta B-West, Argonauta O-North, Argonauta O-South and Massa fields.

Phase 1 production from Abalone, Ostra and Argonauta B-West fields started in 2009 from nine wells, while Phase 2 is expected to come online in late-2013 and FID for Phase 3 was announced in Jul-2013. Production from Phase 3 is expected to peak at 28,000 barrels of oil equivalent per day.

Block BC-10 has estimated reserves of 400 million barrels of heavy crude oil and has produced more than 70 million barrels since coming on-stream in 2009.

ONGC is also planning to exercise its pre-emption rights In Venezuela's multibillion-dollar Carabobo-I project, where the Malaysian state-owned oil company Petronas is seeking to sell its 11 per cent stake. ONGC's overseas arm OVL holds 11 per cent stake in Carabobo-I project.

Other stakeholders in the Carabobo project are Venezuela's state oil company PDVSA with a 60 per cent stake, Spain's Repsol and OVL, each with 11 per cent, and Oil India Ltd and Indian Oil Corp each with 3.5 per cent.