ONGC, Exxon Won't Comment on $1.5 Billion Brazil Deal
RIO DE JANEIRO Jan 30, 2006 (Dow Jones Commodities News via Comtex) The chairman of India's largest oil and gas exploration company, Oil & Natural Gas Corp. (500312.BY), Monday had no comment on a press report that the company is finalizing a deal to acquire a 30% stake in a Brazilian oil field for $1.5 billion from Exxon Mobil Corp. (XOM).
The Indian newspaper Economic Times earlier Monday reported that ONGC's overseas exploration unit, ONGC Videsh Ltd., was finalizing the deal with Exxon Mobil, quoting unnamed investment banking sources.
Asked by Dow Jones Newswires during a press conference in New Delhi about the veracity of the report, ONGC Chairman Subir Raha chose not to comment.
But a source at ONGC who is close to the negotiations confirmed that the talks are on, adding that the company may buy the stake for between $1.4 billion and $ 1.5 billion.
A press official at Exxon Mobil in Rio de Janeiro said the company "doesn't know of any negotiations of that kind."
Exxon's Brazilian unit earlier this month told Dow Jones Newswires that it was negotiating the sale of its 30% stake in the BC-10 oil block in the Campos Basin off the coast of Brazil's Espirito Santo state.
In late December, a consortium led by Royal Dutch Shell (RDSB.LN) and Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, had declared four areas in the BC-10 blocks commercially viable.
Exxon Mobil holds a 30% share in the block. Shell has a stake of 35% and is lead operator in the block, while Petrobras holds another 35% stake.
According to the Indian newspaper, ONGC now needs to talk to Shell and Petrobras, as those two companies have preemption rights on Exxon's participation in the block.
Petrobras and Shell press officials contacted by Dow Jones Newswires in Rio de Janeiro had no immediate comment.
If the deal goes through, it would fit well into the strategy of Indian energy companies to find resources outside the country, Lucrecia Tam, an oil analyst at Deutsche Bank in New York, said.
India, and also China, the other emerging economy whose energy companies are aggressively seeking energy assets worldwide, needs to meet surging energy requirements for its booming industry.
ONGC Videsh currently has stakes in exploration ventures in 17 oil and gas properties in 13 countries - Vietnam, Russia, Sudan, Iran, Iraq, Libya, Myanmar, Syria, Ivory Coast, Australia, Qatar, Cuba and Egypt.
But Tam said the price tag for the participation would be "on the high end," considering that crude found in the block is heavy.
In April, Shell said it may produce between 60,000 barrels a day and 100,000 b/d of crude from the block, and that the block's reserves are estimated at 400 million barrels of oil.
With an investment of some $1.5 billion, Tam said ONGC would end up paying some $10 per barrel of oil in the new field.
"It of course depends on where ONGC sees oil prices going," Tam said. "But it's high considering that the company doesn't have much leverage in Latin America yet."
Shell said in December that, together with its partners, it will continue to analyze options for the development of the block, which is located about 120 kilometers off the city of Vitoria in Espirito Santo state in a water depth of between 1,500 and 2,000 meters.
An initial development concept aims at using submarine systems linked to a floating production and storage vessel, Shell said. Crude found at the block has a density of between 17 to 24 degrees of API.
Shell is, so far, the only foreign company with a relevant oil production in Brazil, producing about 40,000 b/d at the Bijupira and Salema oil fields in the Campos Basin, about 140 kilometers off the coast of Macae in Rio de Janeiro state.
Copyright (c) 2006 Dow Jones & Company, Inc.
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