Royal Dutch Shell (RDSA) is keen to buy a 15% stake in Krishna Godavari (KG) basin block KG-DWN-98/12 from India’s Oil and Natural Gas Corporation (ONGC). This stake was previously owned by Petrobras (PBR), Brazil’s state-controlled oil firm. Petrobras has decided to offload this stake to the ONGC for concentrating on upstream activity in its home country, Brazil.

ONGC has made 10 gas discoveries Incorporatedluding the ultra deep-sea UD-1 find in the KG block where Hydro Oil and Energy India BV — a unit of Norway’s Statoil ASA (STO) — and Cairn India hold 10% apiece.

The discoveries are estimated to hold anywhere between 5 and 15 trillion cubic feet (Tcf) of reserves. Petrobras had an option to raise its stake to 30% in the KG-DWN-98/12 block where UD-1 alone had been assessed to hold 2.08 Tcf of reserves.

Shell has been lagging its peers in terms of upstream growth prospects. But the company’s recent initiatives are noticeable on this front. A decision of stake purchase in the KG basin is a welcome development as this is one of the most prolific basins off the east coast.

In Nov. 2009, Shell had designed a development plan in the Gulf of Mexico for West Boreas discovery, which may hold 100 million barrels of resources. In addition, the company is planning to divest oil fields in Nigeria worth up to $5 billion in response to growing militant activities and a souring of relations with the government.

Zacks Investment Research

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