Gandhinagar: Managing Director of the Gujarat State Petroleum Corporation Ltd (GSPC) and chief secretary J N Singh today termed the around $1.2 billion deal with the Oil and Natural Gas Corporation Ltd (ONGC) for the transfer of 80% of the GSPC’s stake and development rights of its oil exploration block in Kirshna Godavari basin off Andhra Coast as ‘in the interest of both Gujarat and India’.

Addressing a press conference here after chairing a meeting of the company to with regard to the deal, Singh said the deal with a more experienced company was in the interest of both Gujarat and India. ONGC with its vast expertise in oil sector would be able to explore oil in a better manner which in turn would be beneficial for Gujarat and the country as a whole.

To a query regarding the earlier ‘futile’ large scale investments on the project by the GSPC, he said that the current deal has now ended one chapter for the start of a new beginning.
He also elaborated on the deal and the future course of action.

Meanwhile main opposition Congress has termed the deal as an attempt to hide the large scale corruption of the company and said that it would move to court against it.

Gujarat Pradesh Congress Committee president Bharatsinh Solanki told newsmen that there was large scale corruption in the GSPC and the deal has been struck to hide it. The ONGC was also pressurized to enter in to the deal. His party would challenge the merger (the deal) in a court of law.

Notably the ONGC had yesterday announced about its approval to the deal to purchase an 80% stake and development rights in GSPC’s Deen Dayal West field in the Krishna Godavari offshore block OSN-2001/3 for $995.26 million. ONGC will also pay another $200 million for six other discoveries within this block as part payment and the final consideration for those will be decided after their development plan is cleared by the regulator. GSPC has already developed pipeline infrastructure for evacuating gas from this block. ONGC will be able to use that facility for gas to be produced from this block as well as from its neighboring block.

A global reservoir management firm has estimated that the 1,850 sq. km block has gas-in-place of 14.4 trillion cu. ft (tcf) of which 7.6 tcf is recoverable.

“The acquisition of participating interest and operatorship rights in the block fits well with the strategy of ONGC to enhance natural gas production from domestic fields on a faster pace, more so with a goal to reduce import dependency of hydrocarbons by 10% by 2021-22. Trial gas production from Deen Dayal West Field has already begun,” ONGC had said in its statement.

The block, KG-OSN-2001/3, in a said high pressure and high temperature area (deemed difficult for exploration and execution), was allotted to GSPC during the third round of the National Exploration Licensing Policy (NELP), In 2005, the discovery was touted as the largest, with 20 tcf (trillion cubic feet) of reserves. This was disputed by then head of Directorate General of Hydrocarbons, V K Sibal, who described it as a high pressure, high temperature discovery with difficult geography.

GSPC was originally scheduled to begin gas production from the field in 2013. But after spending $3.6 billion, it was found that gas reserves are one-tenth of what was earlier estimated and even this lower reserve was technically difficult to produce.

ONGC statement:

Oil and Natural Gas Corporation Ltd. (ONGC) and Gujarat State Petroleum Corporation Ltd. (GSPC) have been engaged in discussions on a potential transaction for purchase by ONGC of GSPC’s stake and operatorship in NELP-III Block KG-OSN-2001/3 (“Block”) in Krishna Godavari (KG) Basin offshore.

ONGC Board today considered the proposal and approved acquisition of the entire 80% Participating Interest (PI) of GSPC along with operatorship rights, at a purchase consideration of US$ 995.26 million for Deen Dayal West Field in the Block. GSPC has already built significant production facilities like well head platforms, process cum living quarter platform, onshore gas terminal, export pipeline for transporting treated well fluid from process platform to onshore terminal etc. ONGC shall also pay part consideration of US$ 200 million to GSPC towards future consideration for six discoveries other than Deen Dayal West Field, which will be adjusted upon valuation of the these discoveries subsequent to approval their Field Development Plans by DGH / Management Committee of the Block.

The transaction would be documented by signing a Farm-in Agreement with GSPC. Requisite approval from the Government will be sought by GSPC in accordance with provisions of Production Sharing Contract of the Block.

The acquisition of PI and operatorship rights in the Block fits well with the strategy of ONGC to enhance natural gas production from domestic fields on a faster pace, more so with a goal to reduce import dependency of hydrocarbons by the 10% by year 2021-22. The trial gas production from Deen Dayal West Field has already begun. Upon successful completion of the transaction, ONGC shall endeavour to bring the field on commercial production along with the existing partners in the Block.

Through a successful exploration efforts by ONGC, an HP-HT corridor of oil and gas is emerging in KG Basin. The Deen Dayal Field will act as a pivot in developing nearby HP-HT discoveries in Yanam and Godavari PML areas of ONGC, simultaneously. ONGC also finds opportunity to bring the Cluster-I gas discoveries of KG-DWN-98/2 NELP Block and adjacent nomination blocks on a fast track development through utilization of infrastructure of Deen Dayal West Field.

The engagement between ONGC and GSPC has set a pioneering example of synergy of strategies of Government owned companies in upstream sector of oil & gas industry.

ONGC is the largest producer of crude oil and natural gas in India, contributing around 70 per cent of Indian domestic production. ONGC’s market capitalization as on 23rd December, 2016, was INR 2477 billion (US$ 36.47 billion). During the financial year ended 31st March 2016, ONGC Group had produced 57.38 million tonne of oil and oil equivalent gas (mmtoe) (approx. 1.15 mmboe per day); the Consolidated Gross Turnover was INR 1,429.27 billion (US$ 21.83 billion), Consolidated Net Profit was INR 141.24 billion (US$ 2.16 billion) for the year 2015-16 and total oil and gas reserves were 2,022 mmtoe as on 31st March 2016.

Congress demands ONGC move to buy stake in Gujarat PSU be put on hold

Ahmedabad:Congress in the west Indian state of Gujarat has demanded a judicial inquiry into ONGC’s decision to acquire 80 per cent stake in Gujarat State Petrochemicals Corporation’s KG basin gas block and that the company’s move be put on hold.

The state-run Oil and Natural Gas Corporation (ONGC) on Friday announced that it will acquire 80 per cent stake in debt-laden GSPC’s KG basin gas block for USD 995.26 billion.

Under the deal, ONGC will also acquire operatorship of the block KG-OSN-2001/3 in Krishna Godavari (KG) Basin offshore.

Addressing a press conference, state unit Congress president Bharatsinh Solanki alleged the ONGC-GSPC deal is “an attempt to paper over corruption”.

Solanki also claimed that a CAG report, tabled in the Assembly in April this year, had questioned the state PSU GSPC’s investment of Rs 19,576 crore in its KG block project, stating that “future prospects” of the block remain shrouded in “uncertainty.”

Solanki alleged the BJP government is selling the profit-making state-run companies to private parties for their own gain.

“The previous BJP-led NDA government had sold the profit-making government-owned IPCL (Indian Petrochemicals Corp Ltd).

“We would like to ask what will this (ONGC-GSPC) merger yield? Is it to hide corruption? Even bureaucrats who were at the helm of affairs at the GSPC since 2002 should be probed,” Solanki said.PTI

DeshGujarat