GSPC in talks with ONGC on selling gas field stake

By Nidhi Verma

NEW DELHI (Reuters) - The Gujarat State Petroleum Corp (GSPC) said on Monday it is in talks with the country's top explorer Oil and Natural Gas Corp on selling a stake in its gas block off the east coast, to revive the challenging deep water field.

The block, where the discovery of gas was announced in 2005 by Prime Minister Narendra Modi while leading his home state of Gujarat, was to start commercial production in 2011 but difficulties in drilling 5,000 metres below the seabed pushed back the plan by about five years.

GSPC, controlled by the state government, has already invested about $3.6 billion in exploring and building infrastructure around the block but with little success, and now wants ONGC's help on funds and drilling expertise.

GSPC says it now hopes to start commercial production from the Krishna Godavari field later this year, with an initial output of 70-80 million cubic feet a day (mcfd).

"Commercial production is expected to start after the drilling, hydraulic fracturing and completion of the fifth development well (D5), tentatively by the end of October," GSPC said in a statement emailed to Reuters.

ONGC declined to comment on talks with GSPC on buying a stake in the block.

GSPC had managed to extract around 23 mcfd since August 2014 from three wells it drilled using conventional drilling methods.

To expedite recovery, the company has now migrated to hydraulic fracturing (fracking) - a technique popularised by U.S. shale drilling companies and in which fractures are created in rock formations using pressurised fluids. (http://tmsnrt.rs/276QRbw)

The fourth well is expected to start production by this weekend using the fracking method, which would cost $60-$70 million for each well and involve global oilfield services firms such as Halliburton and Schlumberger.

GSPC is also getting help from BP for a review of its drilling activity without cost, the company said.

Global petroleum consultancy firm Gaffiney, Cline and Associates had estimated the block had in-place reserves of 14 trillion cubic feet (tcf), with around 7.6 tcf recoverable.

India's upstream regulator had estimated recoverable reserves of 2 tcf from the block excluding the a part of south eastern area.

(Editing by David Evans)