New Delhi:
Indian oil giant ONGC will pay over USD 1.2 billion for acquiring debt-laden GSPC's entire 80 per cent stake in KG-basin natural gas block, which is struggling to start commercial production despite trial outputs starting nearly two-and-half years back.
Oil and Natural Gas Corp (ONGC) will pay USD 995.26 million for the three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014. Another USD 200 million will be paid as advance consideration of six other discoveries, for which GSPC has been finalising an investment plan from bringing them to production.
"Once the field development plan (FDP), which details the producible gas reserves, is approved by the regulator DGH, we will arrive at a valuation and pay GSPC," a top ONGC official said.
Besides the payout to GSPC, ONGC will have to pay for the entire development cost of the six discoveries which may run into at least a couple of billion dollars.
GSPC, which had a debt of Rs 19,716.27 crore as on March 31, 2015, has so far made 9 gas discoveries in the Bay of Bengal block. Of these, three - KG-08, KG-17, KG-15 - commonly known as Deendayal West (DDW) fields - have been approved for development.
But against an approved field development plan (FDP) cost of USD 2.75 billion, GSPC seen a huge cost-overrun, incurring USD 2.83 billion as on March 31, 2015. Additionally, it had incurred an exploration cost of USD 584.63 million, taking total expenditure as on March 31, 2015 to USD 3.41 billion.
As per the requirement of the FDP, 12 more development wells are yet to be completed which would further escalate the project cost.
The trial production from the DDW field commenced in August 2014, but the average production achieved is only 19.45 million standard cubic feet per day against a targeted commercial production of 200 mmscfd.
Commercial production has not commenced as production rate has not yet stabilised, the official said. The DGH approved FDP had envisaged commercial production from December 2011.
The official said FDP for the six remaining discoveries -- KG-16, KG-22, KG-31, KG-21, KG-19 and KG-20SS, is under review of GSPC.
As per the approved FDP of DDW fields, the estimated oil and gas in place (OGIP) was 1.952 trillion cubic feet (tcf) with a projected cumulative production of 1.0596 tcf at a recovery rate of 54.3 per cent.
The official said the ONGC board approved the acquisition of Gujarat State Petroleum Corp's (GSPC) entire 80 per cent stake in the block on Friday and an agreement for the same would be set to the Gujarat government owned firm within next few days.
"The pact for acquisition will be signed in next week or ten days and we hope to conclude the deal by March end after necessary regulatory approvals from DGH and the government obtained," he said.
