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ONGC signs pact to buy out GSPC's KG block stake for $1.2 bn

GSPC has so far made 9 gas discoveries in the Bay of Bengal block

Press Trust of India  |  New Delhi 

ONGC
Photo: Reuters

State-owned Oil and Natural Gas Corporation (ONGC) has signed definitive agreements to buy out debt-ridden GSPC's entire 80 per cent stake in natural gas block for $1.2 billion.

"Subsequent to board approving the deal on February 23, we have now signed farm-in and farm-out agreements," a senior company official said.



The company will close the deal and pay the Gujarat State Petroleum Corporation (GSPC) the money after regulatory approvals like government nod for transfer of PI (participating interest) and change of operatorship are secured.

"We are hopeful that the deal will be closed in April," he said.

will pay $995.26 million for three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014. Another $200 million will be paid for six other discoveries for which has been finalising an investment plan to bring them to production.

Drilling Pvt Ltd and Geo Global Resources (India) Inc hold 10 per cent stake in the block.

Originally, had offered its 50 per cent stake in the block together with operatorship, but the state-owned firm was not interested. Subsequently, offered its entire 80 per cent stake in the block and on December 23 last year agreed to acquire the same for $1.2 billion.

Two months later, the board approved the acquisition.

Besides the payout to GSPC, 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, with 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 (DDW) fields - have been approved for development.

But against an approved field development plan (FDP) cost of $2.75 billion, has seen a huge cost overrun, incurring $2.83 billion as on March 31, 2015. Additionally, it had run up an exploration cost of $584.63 million, taking total expenditure as on March 31, 2015, to $3.41 billion.

As per the requirement of the field development plan (FDP), 12 more development wells are yet to be completed, which will further bump up the project cost.

The trial production from the 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 the rate has not yet stabilised. The DGH-approved had envisaged commercial production from December 2011.

The official said for the six remaining discoveries -- KG-16, KG-22, KG-31, KG-21, KG-19 and KG-20SS -- is under review of

As per the approved of fields, the estimated oil and gas in place (OGIP) was 1.95 trillion cubic feet (tcf).

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ONGC signs pact to buy out GSPC's KG block stake for $1.2 bn

GSPC has so far made 9 gas discoveries in the Bay of Bengal block

GSPC has so far made 9 gas discoveries in the Bay of Bengal block State-owned Oil and Natural Gas Corporation (ONGC) has signed definitive agreements to buy out debt-ridden GSPC's entire 80 per cent stake in natural gas block for $1.2 billion.

"Subsequent to board approving the deal on February 23, we have now signed farm-in and farm-out agreements," a senior company official said.

The company will close the deal and pay the Gujarat State Petroleum Corporation (GSPC) the money after regulatory approvals like government nod for transfer of PI (participating interest) and change of operatorship are secured.

"We are hopeful that the deal will be closed in April," he said.

will pay $995.26 million for three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014. Another $200 million will be paid for six other discoveries for which has been finalising an investment plan to bring them to production.

Drilling Pvt Ltd and Geo Global Resources (India) Inc hold 10 per cent stake in the block.

Originally, had offered its 50 per cent stake in the block together with operatorship, but the state-owned firm was not interested. Subsequently, offered its entire 80 per cent stake in the block and on December 23 last year agreed to acquire the same for $1.2 billion.

Two months later, the board approved the acquisition.

Besides the payout to GSPC, 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, with 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 (DDW) fields - have been approved for development.

But against an approved field development plan (FDP) cost of $2.75 billion, has seen a huge cost overrun, incurring $2.83 billion as on March 31, 2015. Additionally, it had run up an exploration cost of $584.63 million, taking total expenditure as on March 31, 2015, to $3.41 billion.

As per the requirement of the field development plan (FDP), 12 more development wells are yet to be completed, which will further bump up the project cost.

The trial production from the 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 the rate has not yet stabilised. The DGH-approved had envisaged commercial production from December 2011.

The official said for the six remaining discoveries -- KG-16, KG-22, KG-31, KG-21, KG-19 and KG-20SS -- is under review of

As per the approved of fields, the estimated oil and gas in place (OGIP) was 1.95 trillion cubic feet (tcf).
image
Business Standard
177 22

ONGC signs pact to buy out GSPC's KG block stake for $1.2 bn

GSPC has so far made 9 gas discoveries in the Bay of Bengal block

State-owned Oil and Natural Gas Corporation (ONGC) has signed definitive agreements to buy out debt-ridden GSPC's entire 80 per cent stake in natural gas block for $1.2 billion.

"Subsequent to board approving the deal on February 23, we have now signed farm-in and farm-out agreements," a senior company official said.

The company will close the deal and pay the Gujarat State Petroleum Corporation (GSPC) the money after regulatory approvals like government nod for transfer of PI (participating interest) and change of operatorship are secured.

"We are hopeful that the deal will be closed in April," he said.

will pay $995.26 million for three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014. Another $200 million will be paid for six other discoveries for which has been finalising an investment plan to bring them to production.

Drilling Pvt Ltd and Geo Global Resources (India) Inc hold 10 per cent stake in the block.

Originally, had offered its 50 per cent stake in the block together with operatorship, but the state-owned firm was not interested. Subsequently, offered its entire 80 per cent stake in the block and on December 23 last year agreed to acquire the same for $1.2 billion.

Two months later, the board approved the acquisition.

Besides the payout to GSPC, 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, with 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 (DDW) fields - have been approved for development.

But against an approved field development plan (FDP) cost of $2.75 billion, has seen a huge cost overrun, incurring $2.83 billion as on March 31, 2015. Additionally, it had run up an exploration cost of $584.63 million, taking total expenditure as on March 31, 2015, to $3.41 billion.

As per the requirement of the field development plan (FDP), 12 more development wells are yet to be completed, which will further bump up the project cost.

The trial production from the 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 the rate has not yet stabilised. The DGH-approved had envisaged commercial production from December 2011.

The official said for the six remaining discoveries -- KG-16, KG-22, KG-31, KG-21, KG-19 and KG-20SS -- is under review of

As per the approved of fields, the estimated oil and gas in place (OGIP) was 1.95 trillion cubic feet (tcf).

image
Business Standard
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