Brazilian oil company Petro Brasileiro (Petrobras) has agreed to pick up a 30% stake in one of ONGC’s discovered gas blocks in the Krishna Godavari basin. The company, which is among the largest deepwater oil producers in the world, will now jointly operate the block, KG-DWN-98/2, with ONGC.

Confirming the development, a senior ONGC official said, “We will offload 15% stake in the KG basin block in favor of Petrobras. The Brazilian company will acquire the additional 15% only after the development plan is approved by the directorate general of hydrocarbons (DGH). A signature bonus will be paid to ONGC when the deal is signed.”

The two companies had reached an agreement on swapping of interests in offshore blocks earlier this month, during the visit of Brazilian President Luiz Inacio Lula da Silva. ONGC’s overseas arm, ONGC Videsh (OVL), is likely to get equity in three blocks in the Barrierinhas, Sergipe-Alagoas and Santos basins in Brazil’s east coast. Petrobras had earlier accommodated OVL by waiving its pre-emption right in offshore block BC-10 in OVL’s favour and a 15% interest was transferred to the Indian oil explorer. The companies also have a MoU to jointly conduct oil and gas exploration. Upstream regulator, DGH, in its recent submission to the petroleum ministry pegged ONGC’s gas reserves in the KG basin at 2.09 trillion cubic ft.

Petrobras officials could not be reached for comments and a mail sent to the company remained unanswered. Analysts said ONGC needs cutting-edge technology to develop the KG-DWN-98/2 gas discovery. This is an ultra-deep water block and needs to be drilled to depth of over 3000 meters. Petrobras, which has this expertise, could be a good partner for the block.

Meanwhile, the public sector oil major is waiting for deepwater rigs, expected to arrive by December, to drill below 3000 meters of water depth. It now has rigs that can go up to 2,000 meters. Commercial production from this block will take about five years. ONGC is also learnt to be in talks with other big oil companies like Chevron, Total and Shell to swap its blocks with them.

(The Economic Times)