GSPC avails Rs 3,000-crore loan for K-G project

The state government-owned oil and gas explorer Gujarat State Petroleum Corporation (GSPC), through a consortium of banks, has tied up a Rs 3,000-crore term loan to finance its DeenDayal West (DDW) field in the Krishna Godavari basin.

Senior executives of GSPC, who had lined up its initial public offering (IPO) to Rs 3,066 crore in June this year, confirmed the IPO would now be sometime away, as necessary finances had been arranged. “The money raised would be largely used for funding the DeenDayal West field. Development of the field is on track. We have already floated tenders. The IPO, however, is not required in the immediate future,” a senior GSPC official told Business Standard.

A consortium of banks led by Bank of Baroda have arranged for the funds. A senior bank executive said, “GSPC is one of the best-run public sector units owned by the Gujarat government. The company has prudent working standards and its asset base in gas and oil sector is robust. It is very particular about taking debt only to the extent needed for operations and keep check on interest costs.”

The field, in the Krishna Godavari basin, off the east coast, was discovered in June 2005 and awarded to GSPC under the third round of the New Exploration Licensing Policy. The field represents almost all of its gas reserves and most of its oil reserves, according to the company. “We may, however, be a little delayed in completing the development of the project and commence commercial gas production by our estimated commencement date in June 2012,” the GSPC official added.

The Director General of Hydrocarbons (DGH) has certified two TCF (trillion cubic feet) gas reserves in GSPC’s Deendayal blocks in the KG basin. Presently, exploration is underway in the GSPC operated block KG-OSN 2001/3 located in Deendayal West field and till June, 16 wells had been drilled in the area.

The company had invested around Rs 5,922 crore as of September 30, 2009 (including exploratory costs prior to formulation of the Field Development Programme) in the KG block.

“The development costs and our estimated operational costs, as well as our current target of June 2012 for first commercial production from DDW, are subject to risks of raw material and equipment shortages, price increases above those anticipated and risks in inability to procure or design the engineering services required. The field development plan estimates that DDW will cost a total of approximately Rs 8,000 crore ($1,801.04 mn), of which Rs 5,649 crore ($1,270.61 mn) would be required by FY 2013. We expect to commence commercial gas production by then,” GSPC had stated in the draft red herring prospectus filed with Securities and Exchange Board of India this April.

GSPC had earlier diluted five per cent equity stake with a clutch of financial institutions and Gujarat government-owned public sector enterprises, raising about Rs 900 crore.