Videocon may spin off Brazil bounty

The drums may be beating in far away Brazil, but it’s samba time for Videocon Industries here in India. The company is said to be looking to spin off of its strategic interest in oil and gas exploration into a separate entity and monetising it.

The anticipated bonanza from the second exploratory well in the BM-C-30 block in the Wahoo oil and gas field off the Brazilian coast gives reason for such a move.

VB (Brasil) Petroleo Pvt Ltd, the 50:50 joint venture between Videocon and Bharat Petroleum Corp (BPCL), holds 25% working interest in the block. US-based Anadarko Petroleum Corp owns 30% and is the operator, while Devon Energy Corp holds a 25% interest and SK do Brazil has 20%.

A year ago, BM-C-30 became the only block operated by a private company (Anadarko) to have discovered hydrocarbons in the pre-salt bed. Anadarko had said it would drill a second well in the September quarter to ascertain the exact extent of the Wahoo find.

The Videocon-BPCL JV acquired the 25% stake in the block from Canadian firm EnCana Corp at a price of $283 million (over Rs 1,300 crore) in September 2007, two months before oil was discovered in Wahoo by Brazilian state-owned firm Petrobras.

The 800 km X 200 km marine pre-salt belt is expected to hold as much as 150 billion barrels of oil, second only to Saudi Arabia, which has an estimated 265 billion barrels.
Indeed, just the first discovery in the region, Petrobras’ Tupi field, has been estimated to have around 8 billion barrels of oil equivalent, not to mention the other multi-million-barrel reserves discovered by Petrobas in the area, which have pushed up Brazil’s oil reserves well beyond the earlier estimate of 14 billion barrels.

In comparison, Reliance Industries’ KG D6 block is said to hold total reserves of 2 billion barrels of oil equivalent and Cairn’s Rajasthan block is estimated to hold around 1 billion barrels.

According to Anadarko, initial indications from the well were similar to Petrobras’ Jubarte well, which became the first well in the pre-salt belt to start production a year ago. The discovery was also considered significant since it was just 25 miles from the Jubarte well.

With most discoveries in the region turning in reserve sizes of 3-8 billion barrels each, analysts expect the find in the Anadarko-operated block to be substantial as well.
“In geographical terms, 25 miles is practically next door,” an analyst said, requesting anonymity.

“A spin-off is the only way to fully monetise the find. We expect Anadarko to come up with an official disclosure very soon,” said another analyst, also requesting not to be named.