Brazil's OGX expected to return oilfield to government - source
RIO DE JANEIRO, Aug 20 (Reuters) - OGX Petroleo e Gas SA , the oil company of Brazilian tycoon Eike Batista's tottering EBX Group, will likely return its only producing field to the Brazilian government, a source directly involved in the matter said on Tuesday.
The source told Reuters that OGX is expected to return the offshore Tubarão Azul oil field to the government next year because its declining output will not cover the cost of the equipment needed to continue operating.
Tubarão Azul is OGX's only field in production and its failure to produce oil at the levels that were originally expected was one of the factors that set off the decline of the EBX group of companies.
"We expect Tubarão Azul will stop producing in mid-2014 because of the cost of the platform there," said the source who asked not to be named due to the sensitivity of the matter. The source said OGX's poor financial situation precluded the leasing of a less costly platform.
"Production is low and I don't think they can survive at that level. Everything points to them wanting to return the field," the source added.
Reuters was unable to immediately contact representatives of OGX by telephone.
Debt-ridden Batista is accelerating the breakup of his energy, port and mining empire, ceding control to new investors as some of the companies he founded scramble for fresh capital.
OGX sold a 40 percent stake in two of its most promising blocks to Malaysian state oil company Petroliam Nasional, or Petronas for $850 million in May.
With cash holdings plunging and Batista's own fortune largely earmarked to guarantee Grupo EBX's estimated $11 billion in debt, the companies in his group face the choice of trimming capital spending or reducing their size to stay afloat.
After declaring several oil field prospects non-commercial, OGX has been looking for partners to pick up some of the large costs of ramping up output at several offshore fields.
At the beginning of July, the company said it would not invest any more in increasing the output of Tubarão Azul and that production could halt next year.
In a filing earlier this month, OGX said Tubarão Azul produced just 900 boepd in July, hurt by damage to underwater centrifugal pumps. The field produced 9,700 boepd in June.
Last week, the Rio de Janeiro-based company posted a loss of 4.7 billion reais ($2 billion) in the quarter, compared with a shortfall of 398.7 million reais a year earlier.
A press spokesperson for Brazil's oil regulator ANP said the agency expected a decision on the future of the field soon. If returned to ANP, the field would be put up for auction again.