GSPC to invest Rs 4,000 cr in K-G basin

The company will raise this money through a combination of loans from banks, a possible offering of shares to the public and from the funds its generates through from its operations.

"GSPC will invest around Rs 4,000 crore in the K-G basin. Part of this may also be raised through a public offering," said Saurabh Patel, minister of state for finance and energy in the Gujarat government. He added that GSPC was aiming to start producing gas from the block in 2010. The company has already spent around Rs 3,000 crore in the K-G basin.

Citibank, DSP Merrill Lynch, JM Financial, SBI Caps and Kotak Mahindra have already been appointed as merchant bankers for the public offering, which was initally planned for September.

Chief Minister Narendra Modi however later said the company did not have any plans to raise money through a public offer. "Our finances are strong enough," he said.

Senior officials in the government however said that the company's plans to offer shares to the public has been put off due to the volatility in the markets. The benchmark Sensex of the Bombay Stock Exchange has dipped more than 72 per cent to below 13,000 points in less than seven months.

GSPC recently discovered gas in a new well (KG-22) in the Deendayal block, which it won under the third round of the New Exploration Licensing Policy (Nelp III). It had earlier discovered gas in another well (KG 8) in the same block.

GSPC holds 80 per cent stake in the block while GeoGlobal Resources Inc and Jubilant Enpro have 10 per cent each.

Modi said the reserves from the latest well itself was estimated at around 3 trillion cubic feet (tcf). "The reserves in the entire block is well over 20 tcf," Modi said.

The Directorate General of Hydrocarbons, the regulator, had earlier said that the gas reserves in the block is 1.38 tcf. Reliance Industries' block, one of the largest discoveries in the country, in the same basin has reserves of 11.3 tcf.

Patel also said that GSPC has booked capacity of 10 million cubic metres per day (mcmd) in the gas pipeline Reliance Industries' is laying to transport its K-G basin from Andhra Pradesh to Gujarat.

"As and when our production goes up, GSPC will explore possibilities of putting a new pipeline," Patel said.

Modi added that 300 acres of land  has been acquired in Kakinada in Andhra Pradesh for building on-shore gas processing terminal.

GSPC has drawn a master plan at a cost of Rs 8,000 crore for setting up city gas distribution projects in 40 cities in Gujarat, the company said in a statement.