ONGC completes Rs 7.7,000 cr acquisition of GSPC

New Delhi: India's largest oil and gas producer ONGC said today it has completed the Rs 7,738 crore acquisition of 80 per cent stake in Gujarat State Petroleum Corp's KG basin gas block.

State-owned Oil and Natural Gas Corp (ONGC) had in December last year agreed to buy the entire 80 per cent interest of GSPC along with operatorship rights, in Deen Dayal West (DDW) gas field in Block KG-OSN-2001/3 in the Bay of Bengal for USD 995.26 million (Rs 6,443 crore).

The company had also agreed to pay part consideration of USD 200 million (Rs 1,295 crore) to GSPC towards acquisition rights for discoveries other than DDW field in the block. ONGC said it got government nod for the purchase last month and has now made payments to complete the acquisition.

GSPC, a Gujarat government firm, will remain in the Block holding 10 per cent stake which it acquired from the outgoing partner Geo Global Resources, it said. The remaining 10 per cent interest is with Jubilant Offshore Drilling Ltd.

"ONGC and GSPC had entered into a farm-in-farm-out agreement (FIFO) on March 10, 2017 to firm up the methodology and modus operandi to give effect to this transaction. "Following approval of Government of India for transfer of participating interest and operatorship as per provisions of the Production Sharing Contract, ONGC today has taken over the block," the company said in a statement.

ONGC said the acquisition fits well with its strategy to enhance natural gas production from domestic fields on a faster pace. The trial gas production from Deen Dayal West field began in 2014 and commercial production from April 1, 2016.

The company plans to use GSPC field facilities to bring to production the discoveries in its neighbouring KG-DWN-98/2 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 Bay of Bengal 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 USD 2.75 billion, GSPC has seen a huge cost overrun, incurring USD 2.83 billion as on March 31, 2015.

Additionally, it had run up an exploration cost of USD 584.63 million, taking total expenditure as on March 31, 2015, to USD 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.

The DGH-approved FDP had envisaged commercial production from December 2011.

Officials 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) was 1.95 trillion cubic feet (tcf).