Two years after acquiring an 80 per cent stake in Gujarat State Petroleum Corporation’s (GSPC) KG Basin gas block, state-run Oil and Natural Gas Corporation (ONGC) is yet to get complete legal ownership of the block.
Two senior company executives said “the production sharing contract (PSC) of the block is yet to be transferred to ONGC”. The deal was completed in August 2017, for which ONGC paid about ~7,738 crore.
The operatorship (the right to operate a well, field, or other oil source) continues to be with GSPC, according to the website of the Directorate General of Hydrocarbons (DGH), the sector’s regulator.
Different reasons are being given for the delay. “I would not like to say the contract is not yet with ONGC, but certain financial adjustments have to be made,” said a source. Another official said ONGC had not done “proper documentation” for the approval.
There is also a lack of clarity on who will approve the change. While a government official said the required amendment in PSC would be done by the petroleum ministry, an ONGC executive said an empowered group of secretaries belonging to different ministries would clear the change.
GSPC has already used the consideration received from ONGC for partial pre-payment of its term loan, according to GSPC’s 2017-18 annual report. The Gujarat-based company still holds 10 per cent participating interest in the block as non-operating joint venture partner.
ONGC is doing fracking in the block and a report on that will be submitted to the DGH in three months. This will pave the way for a new field development plan.
J N Singh, managing director, GSPC, said: “Every right related to the block has been transferred and the deal has been done. If at all some issues are there, it will just be a formality.”
Until the PSC is transferred, the proceeds from the block are unlikely to be part of ONGC’s books, according to industry experts. An ONGC executive, however, refused to comment on this. “ONGC is bearing the block’s expenditure,” said another executive.
“This should be pursued by the exploration division and executive committee without any kind of delay as the issue is about complete legal ownership of the block,” said R S Sharma, former chairman and managing Director, ONGC.
In December 2016, ONGC agreed to buy 80 per cent interest of GSPC, along with operatorship rights, in the Deen Dayal West (DDW) gas field in Block KG-OSN-2001/3 in the Bay of Bengal for $995.26 million. It had also reportedly agreed to pay part consideration of $200 million towards acquisition rights for discoveries other than DDW field in the block.