Petrobras to exit ONGC block, Shell keen to get in

Last Updated: Sunday, January 3, 2010 - 12:29

New Delhi: Brazil`s Petrobras had decided to
quit Oil and Natural Gas Corp`s (ONGC) prolific gas discovery
block in the Krishna Godavari basin, a vacancy that Royal
Dutch/Shell and BP Plc are keen to fill-in.

Petroleo Brasileiro SA or Petrobras, Brazil`s state-
controlled oil firm, wants to offload its 15 percent stake in
KG-DWN-98/2 to ONGC as it wants to concentrate on developing
massive oil and gas finds back home, a top official said.

The vacancy may not last long as Shell and BP Plc have
expressed interest in taking the stake in the block that sits
next to Reliance Industries` giant KG-DWN-98/3 or KG-D6 block
off the east coast.

Shell has offered technology to convert natural gas into
liquid (liquefied natural gas) at a floating offshore facility
at the deepsea and then transporting the fuel in ships to the
shore. BP on the other hand has offered the conventional
technology of producing gas at an offshore platform and then
transporting it to land through under-sea pipelines.

"For us, Shell technology makes more sense," he said,
adding, a decision to induct Shell or BP can only be taken
after ONGC acquires Petrobras` shareholding in the block.

ONGC has made 10 gas discoveries, including the ultra
deepsea UD-1 find in the block where Hydro Oil and Energy
India BV - a unit of Norway`s StatoilHydro and Cairn India
hold 10 percent a piece.

The discoveries are estimated to hold anywhere between 5
and 15 trillion cubic feet of inplace reserves.

Petrobras had an option to raise its stake to 30 percent
in the KG-DWN-98/2 block where UD-1 alone had been assessed to
hold 2.08 trillion cubic feet of reserves.

"They (Petrobras) has told us that it wants to withdraw

to
concentrate back home," the official said, adding the
Brazilian firm refused to contribute to further drilling in
the block.

Petrobras told ONGC that it is putting all its resources
on developing finds off the Atlantic coast, including the 8
billion barrels Tupi oil find. The over USD 100 billion spend
may allow Brazil to overtake the output of all OPEC members
except Saudi Arabia.

"We don`t have technology to bring the UD-1 gas find in
ultra deepsea to production. Thats why we got Petrobras and
Statoil," the official said.

ONGC plans to tie up gas discoveries in KG-DWN-98/2
(excluding UD-1) with the G-29, GS-4 and Vashistha gas finds
in a shallow water block KG-OS-DW4 in the same KG basin. The
gas finds in KG-DWN-98/2 (excluding UD-1) and three in
adjacent block together hold 6.37 Tcf of inplace reserves.

Gas production may begin by 2013, he said, adding
Vashistha and neighbouring S-1 discovery alone would yield six
mmscmd of output.

Overall gas production from the integrated project is
estimated at 25 mmscmd.

Without UD-1, KG-DWN-98/2 block is assessed to hold just
over 5 Tcf of inplace gas reserves.

"We plan to drill six appraisal well in KG-DWN-98/2
block and three in KG-OS-DW4. Following this we will prepare a
detailed development plan," the official said. "As of now, we
think we will need 58 wells to produce the oil and gas planned
for the fields."

The block was awarded to Cairn Energy India Ltd in the
first round of bidding under New Exploration Licensing Policy
(NELP) in 1999. CEIL sold 90 per cent of the stake in the
block to ONGC in 2004.

ONGC gave stakes to Petrobras and StatoilHydro to get
their world renowned expertise in deep sea exploration. "We
have found gas in the ultra deep sea in the block. India
does not have technology to exploit that so foreign partners
were roped in," the official said.

Petrobras has technical expertise in ultra deep-water oil
and gas production which ONGC has been looking to tap for a
while now. The block lies in water depths of over 5,500
metres.

PTI



First Published: Sunday, January 3, 2010 - 12:29

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