ONGC, Shell buy rest of Brazil offshore block from Petrobras for $1.6B

Royal Dutch Shell Plc and India's Oil and Natural Gas Corp (ONGC) purchased the remaining 35 per cent of a Brazilian offshore oil block from their partner, Brazil's state-run Petroleo Brasileiro SA, Shell said in a statement on Monday.

Under the accord, which the companies began negotiating in September, Shell will get an additional 23 per cent of BC-10, raising its stake to 73 per cent. ONGC will get an additional 12 per cent, boosting its stake to 27 per cent, Shell said.

Petrobras had originally agreed to sell its 35 per cent stake to China's Sinochem for $1.56 billion. Shell and ONGC, though, exercised their right of first refusal. ONGC agreed to $529 million for the 12 per cent stake in October, valuing the entire sale about the same as the amount Sinochem agreed to pay.

The additional share of oil coming to Shell from BC-10 could see the company jump past China's Sinochem to become Brazil's No. 4 producer, behind Petrobras, Norway's Statoil ASA and Britain's BG Group Plc , based on October figures from Brazil's petroleum regulator, the ANP.

Petrobras, as the Brazilian company is known, has been selling off assets in Brazil and abroad in an attempt to raise cash to finance a $237 billion five-year investment plan, the world's largest corporate spending program.

Petrobras' need for cash has risen as production from older oil fields has stagnated and output from new areas comes on line behind schedule, forcing the company to boost debt to finance investment. The government has also forced the company to sell gasoline and diesel fuel at home at prices below those on the world market, causing its refining and supply arm to lose money as fuel imports rise.

The BC-10 block is home to Shell and ONGC's Parque das Conchas, or "Shell Park" area. The block, at the north end of Brazil's Campos Basin, northeast of Rio de Janeiro, is home to the Ostra, Abalone, and Argonaut oilfields. Shell is the operator of the area.

Parque das Conchas, which began operating in 2009, produces about 50,000 barrels a day of oil. The company approved a third phase of the project in July which could add as much as 28,000 barrels a day of oil output to the project, Shell said.

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