Home > Business > ONGC in talks to buy stake in GSPC’s KG basin block

ONGC in talks to buy stake in GSPC’s KG basin block

 PTI |  2016-09-09 22:43:48.0  |  New Delhi

ONGC in talks to buy stake in GSPC’s KG basin block

“I have never spoken on GSPC earlier. But I think today I can speak to on GSPC. We have been talking to GSPC for acquiring certain percentage of their (Deendayal) field and the talks are on,” ONGC Chairman and Managing Director D K Sarraf told reporters here.

Since the BJP-led government came to power at the Centre, the Gujarat government firm GSPC has been seeking to sell a majority stake in its KG-OSN-2001/3 (Deendayal) block in Bay of Bengal to ONGC to avoid defaulting on loans. 

ONGC initially was not keen to buy stake in the block as it felt the block had reserves far less than what GSPC was claiming and the asking price for the stake was not commensurate with the returns.

“We did some technical study on the field and post that we thought that it would be better (to appoint a consultant) because it is quite a difficult field,” he said. Refusing to detail the size of the deal being discussed, he said the size of investment would be “significant”. “We have appointed a technical consultant Ryder and Scott for evaluation of the field,” he said. “We are talking to GSPC for acquisition of certain percentage of their field.” Asked if an overseas partner may be roped in, he said, “as of now no.” Ryder Scott Petroleum Consultants has been asked to evaluate gas properties in the GSPC block and independently certify the reserves quantities, the source said.

GSPC was to begin gas production from the block in 2013 but after sinking in $3.6 billion it was found that gas reserves are one-tenth of 20 trillion cubic feet claimed in 2005 and that too is technically difficult to produce.

In the process it has amassed Rs 19,576 crore of debt, on which interest cost was Rs 1,804.06 crore in 2014-15, according to the CAG. And against this its revenue was Rs 152.51 crore in 2014-15. Sources said GSPC has been doing trial production of a very small volume of gas from August 4, 2014 and has not yet reached commercial production and in absence of revenue commensurate with the debt servicing obligations it risks becoming a defaulter.

To bail out of the situation, it offered to sell 50 per cent stake to ONGC, they said. GSPC also wants ONGC to use its under-sea infrastructure for a fee. ONGC has gas discoveries in a neighbouring block and GSPC wants gas from those to be routed through its Deendayal block infrastructure for onward transportation to the shore.

‘ONGC was unaware of KG gas seepage (to RIL)... Shah report omits this fact’
State-owned Oil and Natural Gas Corp (ONGC) on Thursday said unlike Reliance Industries it had no prior knowledge of natural gas from its block seeping into adjoining fields of the private firm. Justice A P Shah Committee last week opined that Reliance Industries should pay the government for the “unjust enrichment” by way of drawing natural gas from an adjacent block of ONGC in the KG basin of the Bay of Bengal since 2009. While holding that RIL may have had prior knowledge of the fields of the two companies being inter-connected and gas migrating from one to another, the report also recorded RIL charge that ONGC knew of the connectivity way back in 2007 but choose to remain silent till 2013. 

“ONGC had no knowledge about this earlier. As soon as we came to know about this we took action in 2013 (by approaching regulatory authorities). It seems that there is no mention our submission on this (Shah Committee) in the report. I don’t know what is the reason for that and why there is no mention of our submissions,” ONGC Chairman and Managing Director D K Sarraf told reporters here. 

In submissions to the Shah Committee, “We had very strongly submitted that ONGC had no prior knowledge,” he said. In the report, the panel had sought enquiry into the allegations of prior knowledge on the part of both RIL and ONGC, with particular emphasis laid upon the failure of both parties to present the information they had to the DGH. Sarraf said the company spoke out in 2014 when the company apprehended that some portion of natural gas has flown from its fields to the adjacent KG-D6 block of RIL. “It was very tough statement to be made. It was made on the technical inputs.” 

Share it
Top