ONGC board okays GSPC deal

Backed by state guarantee, to get $6-6.9 bn for K-G gas; development of Ratna fields also approved

Sale of the Deendayal Upadhaya oil & gas block of Gujarat State Petroleum Corporation has moved a step closer. The board of directors at Oil and Natural Gas Corporation approved on Thursday the implementation of an agreement with the former.

Under the agreement, to be signed by the two companies, GSPC will have to buy natural gas from the block at a price of about $6 per million British thermal units. In the fifth year, the price would be $6.9 per mBtu.

If the government notified price ceiling for high pressure, high temperature gas is lower than the agreed price, GSPC will reimburse ONGC the difference. The Gujarat government will extend an agreement for the payment, said an official.

These conditions will be part of a 'farm-in/farm-out' agreement with GSPC for acquisition of its 80 per cent participative interest and operatorship in the block, awarded to the state government company in the third round of auction under the New Exploration and Licensing Policy.

The ONGC board had on December 23 decided to acquire the 80 per cent stake in the block, which had caused debt trouble for GSPC. "The two companies, after several rounds of discussions and legal due-diligence, have agreed to the terms and conditions to be incorporated in the farm-in/farm-out agreement," ONGC stated.

The board also approved on Thursday the development of five projects with an aggregate investment of Rs 7,327 crore, to lead to production of 14.969 million tonnes (mt) of oil and 2.972 billion cubic metres (bcm) of gas.

This includes development of the Ratna R discovery at a cost of Rs 4,105 crore. The R-12 field was discovered in 1979 and put on production in 1983, continuing till 1994. The government awarded the contract for development of the Ratna and R-Series fields in 1996 to an Essar Oil-led consortium in a competitive bidding round. However, the contract could not be signed due to various issues.

In March 2016, the Government reverted the Ratna & R-Series fields to ONGC for development and production. Besides, development of the R-Series, the R-12A (Ratna) field would also be revived. The Ratna-R Series fields are 130 km southwest of Mumbai and around 41 km from the Heera field in the Western Offshore, at a water depth of 40-50 metres.

"Of 37 structures in the field, eight were found to be oil-bearing and only one R-12 (Ratna) field was under exploitation during the period 1982 to 1994. The remaining R-series structures are yet to be monetised," said ONGC.

The scheme envisages first oil production by 2018-19. A peak production rate of 14,583 barrels of oil a day is expected in 2019-20, with cumulative production of 8.39 mt of oil and 1.696 bcm of gas during the project life. The project comprises drilling and completion of 31 wells (22 producers and nine water injectors), installation of five new well platforms (including one riser-cum-wellhead platform) with associated pipelines, revival of one platform and hiring of a jack-up mobile offshore production unit having oil and gas processing facilities. The oil and gas will be evacuated through the existing Heera Process Complex. The project is scheduled to be completed by end-May 2021.