OVL may block Chinese bid to buy stake in Brazil oilfield

ONGC Videsh Ltd, the overseas arm of state explorer Oil & Natural Gas Corp (ONGC), is mulling exercising its pre-emption rights to block China's Sinochem Group from buying 35% interest in Brazilian oilfields for USD 1.54 billion.

OVL holds 15% stake in the block BC-10, known as Parque das Conchas, where Brazilian state-controlled oil fir m Petroleo Brasileiro SA or Petrobras is selling its 35% stake to Sinopec.

The Indian firm as also Royal Dutch Shell Plc, which is the operator of BC10 with a 50 per cent stake, holds right of first refusal or pre-emption rights. They can individually or together buy 35 per cent stake at the USD 1.54 billion price agreed between Petrobras and Sinochem.

"When Petrobras put its 35 per cent stake in BC-10 for sale, OVL evinced interest but for strategic reasons did not place a bid," a source with direct knowledge of the development said.

Shell too did not put a bid for the stake and unlike OVL, it did not even visit the dataroom Petrobras had set up to lure potential buyers. "If OVL had bid - higher or lower than Sinochem's offer, it would have revealed its cards. But now, it can analyse if it is worth paying USD 1.54 billion to take an additional 35 per cent stake in the block. If it makes economic sense, OVL will for sure exercise its pre-emption right and block Sinochem deal," the source said.

If OVL decides to exercise its pre-emption right, this will be the first instance of the Indian firm outdoing China. So far, OVL has lost out to many an asset to the Chinese, the last being a 8.4% stake in Kazakhstan's giant Kashagan oilfield.

India has lost at least USD 12.5 billion of deals to China in past years. Block BC-10 is located in the Campos Basin approximately 120 km southwest of Vitoria City off the coast of Brazil.