In a first by an Indian firm, ONGC Videsh (OVL) has exercised its pre-emption rights to block Chinaís Sinochem Group from buying 35% interest in a Brazilian oilfield for $1.54 billion.
OVL, the overseas arm of state-owned Oil and Natural Gas (ONGC), in collaboration with Royal Dutch Shell, will buy the 35% stake in block BC-10, known as Parque das Conchas, that Brazilís Petrobras had planned to sell to Sinochem, sources with direct knowledge of the development said.
While the Indian firm will pick up 12.08% stake, the remaining 23% will go to Shell.
Sources said OVL-Shell, who by virtue of their existing stake in BC-10 had a first right of refusal or pre-emption when fellow participants offer stakes for sale, have informed Petrobras about their decision.
OVL currently has a 15% stake in the block which is entitled for an extra 8% taken from the 35% stake being sold by Petrobras. Shell is the operator with 50% share.
However, OVL manged 12.08% after convincing Shell to take a smaller stake than what it was entitled to, sources said.
OVL managing director D K Saraf declined to comment citing confidentiality in the joint operating agreement (JOA).
This is the first time an Indian firm has exercised pre-emption rights to block the sale of an oilfield stake to a Chinese firm. Petrobras is shedding non-core assets to help finance a five-year $237-billion investment plan. Last month, it agreed to sell its stake in block BC-10, known as Parque das Conchas, in Brazilís Campos Basin, for $1.54 billion to Sinochem Group.
A few weeks back, OVL lost out on the acquisition of US energy major ConocoPhillipsí 8.4% stake in Kazakhstanís giant Kashagan oilfield for $5 billion.
Kazakhstan first exercised its pre-emption right to block the OVL deal and then sold the 8.4% stake to China National Petroleum (CNPC).
India has lost at least $12.5 billion of deals to China in past years.
OVL had acquired 15% 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.