ONGC not to take over GSPC debt; deal to re­tire only 40% of Gu­jarat PSU’S loan

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ONGC’S buy­ing 80 per cent stake in the flag­ship as­set of Gu­jarat State Petroleum Cor­po­ra­tion (GSPC) will be with­out a debt takeover. GSPC has `20,038 crore of loans (from about 15 banks) on its books on ac­count of the Deen­dayal Upad­hyaya block’s dis­cov­ery in the Kr­ishna- Go­davari basin. The Gu­jarat gov­ern­ment-owned com­pany has been un­der the lens of the Comptroller and Au­di­tor Gen­eral of In­dia (CAG) for in­cur­ring this huge debt. With this $1.2-bil­lion (`8,160 crore) deal, GSPC will not be able to re­tire even half its debt.

Says D K Sar­raf, chair­man and man­ag­ing di­rec­tor of ONGC, “We are tak­ing over the block, not the debt. It will be an un­en­cum­bered as­set.” In an in­ter­view af­ter the deal an­nounce­ment, J N Singh, man­ag­ing di­rec­tor of GSPC, had said the com­pany “didn’t have that deep a pocket to go ahead with the K-G basin. It is, there­fore, in the na­tional in­ter­est that we are go­ing ahead with ONGC, which is best suited for such ex­plo­ration work.” Sar­raf dis­missed sug­ges­tions that the deal was to bail out GSPC. “Just be­cause a com­pany is in a des­per­ate sit­u­a­tion does not mean it does not make com­mer­cial sense for an­other com­pany to buy the as­set,” he said.

On De­cem­ber 23, the ONGC board de­cided to buy the en­tire 80 per cent stake in GSPC’S KGOSN-2001/3 block in the K-G basin off­shore. Canada's Geo Global Re­sources and Ju­bi­lant En­ergy, part of the Ju­bi­lant Bhar­tia Group, have the remaining 10 per cent each in the block, auc­tioned in the third round of bid­ding un­der the New Ex­plo­ration and Li­cens­ing Pol­icy. The stake,in­clud­ing op­er­a­tor rights, has come to ONGC for $995.26 mil­lion.

It will pay $200 mn to GSPC for six dis­cov­er­ies other than this field, to be ad­justed later upon val­u­a­tion of these dis­cov­er­ies. The val­u­a­tion, based on an agreed mech­a­nism, will be worked out once field de­vel­op­ment plans are ap­proved by an over­sight com­mit­tee set up un­der the pro­duc­tion shar­ing con­tract and the gov­ern­ment’s Di­rec­tor Gen­eral of Hy­dro­car­bons (DGH). Sar­raf said the trans­ac­tion would be com­plete by March 31.

The block’s Deen­dayal West field has started test pro­duc­tion, along with well­head plat­forms, on­shore gas ter­mi­nals and an ex­port pipeline for trans­port­ing treated wellfluid from the process plat­form to on­shore ter­mi­nal, etc. Fi­nance Min­is­ter Arun Jait­ley had last year told Par­lia­ment that in­ter­na­tional con­sul­tant Gafine Cline As­so­ciates had cer­ti­fied that the block holds 14.4 tril­lion cu­bic ft of gas re­serves. Prime Min­is­ter Naren­dra Modi, as chief min­is­ter of Gu­jarat in 2005, had put the fig­ure at 21 tcf. DGH has cer­ti­fied Deen­dayal West to hold 1.8 tcf of re­serves. By Jait­ley’s ad­mis­sion, pub­lic sec­tor banks lent the com­pany money based on the 21 tcf es­ti­mate.

De­layed pro­duc­tion and con­fu­sion about how much the blocks holds has been a worry for the lenders. Ac­cord­ing to the CAG, the com­pany had spent `14,642 crore by end-march 2015 for de­vel­op­ment of the area.

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