ONGC to pay over $1.2 bn for GSPC’s stake in KG basin
NEW DELHI: State-run ONGC will pay over $1.2 billion to buy debtladen GSPC’s entire 80% stake in KG-basin natural gas block, which is struggling to start commercial production despite trial outputs starting nearly two-andhalf years back.
Oil and Natural Gas Corp (ONGC) will pay $995.26 million for the three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014. Another $200 million will be paid as advance consideration of six other discoveries, for which GSPC has been finalising an investment plan for bringing them to production.
“Once the field development plan (FDP), which details the producible gas reserves, is approved by the regulator DGH, we will arrive at a valuation and pay GSPC,” a top ONGC official said.
Besides the payout to GSPC, ONGC will have to pay for the entire development cost of the six discoveries which may run into at least a couple of billion dollars.
GSPC, which had a debt of ₹19,716.27 crore as on March 31, 2015, has so far made nine gas discoveries in the Bay of Bengal block. Of these, KG-08, KG-17, KG-15 – commonly known as Deendayal West (DDW) fields – have been approved for development.
But against an approved field development plan (FDP) cost of $2.75 billion, GSPC seen a huge cost-overrun, incurring $2.83 billion as on March 31, 2015. Additionally, it had incurred an exploration cost of $584.63 million, taking total expenditure as on March 31, 2015, to $3.41 billion.
As per the requirement of the FDP, 12 more development wells are yet to be completed which would further escalate the project cost.
The trial production from the DDW field commenced in August 2014, but the average production achieved is only 19.45 million standard cubic feet per day.