ONGC has moved a step further in its bid to acquire Gujarat State Petroleum Corp’s 80 per cent stakes in Deen Dayal West (DDW) gas field in the KG basin. It will have to shell out Rs 7,738 crore for the asset.
In December last year, ONGC had agreed to buy entire interest of GSPC in the field along with operatorship rights for $ 995 million (Rs 6,443 crore).
The company will also pay part consideration of $ 200 million (Rs 1,295 crore) to GSPC towards acquisition rights for discoveries other than DDW field in the block.
“A farm-in agreement was signed with GSPC on March 10, 2017 with an economic data of March 31, 2017.” ONGC has informed its investors.
During April-June quarter, “Government of India has approved the acquisition of entire 80 per cent participating interest of GSPC along with operatorship rights,” it further said.
ONGC will make payments to GSPC “on fulfilment of certain conditions precedent, it added.
Sources said that the deal is likely to be closed within a month’s time.
ONGC will pay $ 995.26 million for three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014. Another $ 200 million will be paid for six other discoveries for which GSPC has been finalising an investment plan to bring them to production.
Jubilant Offshore Drilling Pvt Ltd and Geo Global Resources (India) Inc hold 10 per cent stake in the block.
Originally, GSPC had offered ONGC its 50 per cent stake in the block together with operatorship, but the latter was not interested. Subsequently, GSPC offered its entire 80 per cent stake in the block.
GSPC, with a debt of Rs 19,716.27 crore as on March 31, 2015, has so far made 9 gas discoveries in the block. Of these, three — 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 has seen a huge cost overrun, incurring $ 2.83 billion as on March 31, 2015. Additionally, it had run up 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 field development plan (FDP), 12 more development wells are yet to be completed, which will further bump up 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 against a targeted commercial production of 200 mmscfd.
Commercial production has not commenced as the rate has not yet stabilised. The DGH-approved FDP had envisaged commercial production from December 2011.
Sources said FDP for the six remaining discoveries KG-16, KG-22, KG-31, KG-21, KG-19 and KG-20SS is under review of GSPC.
As per the approved FDP of DDW fields, the estimated oil and gas in place (OGIP) is 1.95 trillion cubic feet (tcf).