English 
Spanish 
3 min read
The two companies formed a joint venture incorporated IBV Brasil Petróleo Ltda to acquire Encana Brasil Petróleo Ltda from Canadian gas producers EnCana
State-owned Bharat Petroleum Corp Ltd (BPCL) was forced to pay by its defaulting partner Videocon Industries Ltd after it relied on a rarely used model to acquire stakes in five oil blocks in Brazil, sources say.
Read also
- Petrobras announces expansion of investments in Northern Brazil due to the high potential on the Brazilian equatorial margin
- Companhia Hidrelétrica do São Francisco (Chesf) will invest BRL 90 million in a wind and solar power plant project in Bahia
- President of GLP Brasil says that the Brazilian logistics market is far from saturation
In September 2008, BPCL and Videocon Industries formed a joint venture incorporated by IBV Brasil Petroleo Limitada to acquire Encana Brasil Petroleo for US$283 million.
Sources say that normally such acquisitions are made through unincorporated joint ventures, but BPCL has opted to form an incorporated joint venture, which is organized as a separate and distinct legal entity. And the entire entity is considered to be in default if any of the partners fails to pay its share of costs.
- No soy or sugarcane! Brazil's largest exported product is oil, to the delight of Petrobras and other companies in the sector.
- From pre-salt to the largest gas reserve: Petrobras discovers 6 trillion cubic feet of gas in Colombia and leads global energy revolution
- The impressive numbers from the 10 oil platforms with the HIGHEST production in October: More than 2 million barrels per day in the spotlight in the pre-salt!
- Brazil to auction 78 MILLION barrels of oil! China took the majority in the last auction
With the bankrupt Videocon unable to pay its requests for money for the exploration and development of the oil fields, the IBV consortium faced the likelihood of default and the risk of being evicted.
To save the day, BPCL pumped $53,98 million into IBV in 2019-20, resulting in a 55,13 percent stake in the joint venture, sources with direct knowledge of the development said.
If BPCL had acquired the Brazilian blocks through an unincorporated joint venture, only Videocon would have been considered in default for failing to pay its share of the costs. This default would not have affected the BPCL.
Sources said that in an unincorporated joint venture – which is not constituted as a legal entity and is formed only by contract – BPCL would not have risked losing the block if the partner did not pay. BPCL's bet would not have changed even if Videocon defaulted.
However, in the model chosen by BPCL, the entire joint venture was at risk of being labeled as a defaulter and losing the oil fields.
When contacted, a senior BPCL official said the company's increased stake in IBV is temporary and would revert to the previous agreement once the company taking over Videocon pays for the default.
Videocon oil and gas assets being auctioned to recover bad bank loans
BPCL owns 12 offshore blocks through its subsidiary Bharat PetroResources Ltd (BPRL). Five of these oil blocks are in Brazil, two in the United Arab Emirates and one in Mozambique, Indonesia, Australia, Israel and East Timor.
IBV Brasil Petróleo Limitada (incorporated in Brazil), a joint venture company of BPRL Ventures BV, and Videocon Energy Brazil Ltd, relinquished subsidiaries of BPRL and Videocon Industries Limited, respectively, hold interest in 5 blocks in 3 concessions in the Brazil.
In the Sergipe Alagoas concession (BM-SEAL-11), which currently consists of three blocks, Petrobras do Brasil is the operator with a 60 percent interest and IBV holds the remaining 40 percent.
During exploration periods, four oil and gas discoveries – Barra, Farfan, Cumbe and Barra were made in this concession.
In the Potiguar concession (BM-POT-16), Petrobras is the operator with a 30 percent stake, the other partners are IBV (20 percent), Petrogal (20 percent) and BP (30 percent).
In the Campos concession (BM-C-30), BP with 35,7 percent is the operator and the other partners are IBV Brasil (35,7 percent) and Total da França (28,6 percent).
Source: Energy World
