Exercises pre-emption right to block the sale to a Chinese company

Oil and Natural Gas Corporation Videsh Ltd. (OVL), on Monday, announced that it had bought an additional 12 per cent stake in a Brazilian oilfield for $529 million.

OVL, which had a 15 per cent stake in block BC-10 along with Royal Dutch Shell, exercised a pre-emption right to block China’s Sinochem group from buying a 35 per cent interest in the oilfield from Petrobras of Brazil. While the Indian firm will pick up a 12.08 per cent stake, Shell will acquire the remaining 23 per cent.

“In August, Petrobras entered into a sales transaction with Sinochem for disposal of their 35 per cent interest in BC-10 for $1.543 billion. This agreement was subject to pre-emption rights of the partners, Shell and OVL,” OVL says in a statement.

“As a follow-up of the pre-emption notice, OVL, through its affiliates, has signed sale and purchase agreements with Petrobras on October 11 for acquisition of 12 per cent interest in the block, for a consideration $529.03 million,’’ the statement adds.

The acquisition of additional participating interest in the block is subject to approval of the Brazilian anti-trust and regulatory authorities. Shell and OVL served the pre-emption notice to jointly acquire 35 per cent on September 17. On closing, OVL’s stake in the block would increase to 27 per cent, the statement says.

Block BC-10, also known as Parque das Conchas, is in the Campos Basin of Brazil, and includes four offshore deep-water fields - Ostra, Abalone, Argonauta and Nautilus, and a few identified exploration prospects. It is located about 120 km from Vitoria town.

Similarly, the statement said, OVL had been awarded two onshore blocks in Myanmar - B-2 (Zebyutaung-Nandaw) and EP-3 (Thegon-Shwegu). Block B-2, with an area of 16,995 sq. km, is located in Northern Myanmar, bordering Manipur State in India, and Block EP-3, spread over 1,650 sq. km, is in Central Myanmar. Myanmar had announced the second round of bids for 18 onshore blocks in January. OVL was one of seven Indian companies that were short-listed as pre-qualified bidders.

OVL already has a 17 per cent stake in the Shwe and Shwe Phyu (Block A-1) and Mya North and Mya South (Block A-3) fields in Myanmar, and has invested $565 million. Myanmar is one of the focus countries for OVL, the statement adds.

The acquisition in the Brazilian field is the first time that an Indian company has exercised pre-emption rights to block the sale of an oilfield stake to a Chinese firm.

Second phase

OVL had acquired 15 per cent stake in BC-10 in April, 2006, for $165 million. Additionally, its share of cost of developing the field is $748.05 million, of which $383 million has already been spent. The first two phases of the project are estimated to cost $4.987 billion. The BC-10 block started production in 2009. The Ostra field in the block pumps about 21,000 barrels a day of oil.

The second-phase development is expected to start by the end of this year, with a peak production of 35,000 barrels of oil equivalent a day.

More In: Industry | Business