The Hindu Business Line : GSPC goes all out to strike gas in third KG well

The company's hopes of getting into the big league now rests squarely on the outcome of the third well that it began drilling at KG-OSN-2001/3, its Krishna Godavari basin block, on January 17.

It may be recalled that the KG field of GSPC had indicated prognosticated reserves of initial gas in place (IGIP) up to 44 TCF (trillion cubic feet) in November 2002.

At that time, a conservative estimate of recoverable gas was put at 10 TCF, thus putting the KG-3 block in the giant gas field category.

Having `temporarily abandoned' its first two wells at 2,625 metres and 2,875 metres, respectively, GSPC has now decided to go full steam ahead with the third.

As per the advice of three international consultants — Gaffney Kline & Associates, Petrotel (both US), and DeGoyler & MacNaughton, UK — GSPC will go for a 5,200-metre well in the third attempt. With this, the company will be moving further close to the Godavari delta.

While the cost of drilling the first well, over 113 days, was $17 million (Rs 71 crore), the second cost the company $8 million (Rs 33crore).

The average cost of operating its offshore rig is $1,30,000 (Rs 55 lakh) per day.

GSPC is hoping to complete the drilling of the third well in 90 to 100 days.

According to a GSPC official, there was pressure on the company to find gas at the earliest.

Unlike in the case of Cairn Energy, which could dig 16 wells before striking gas in its 17th well in Rajasthan, a Government company such as GSPC would not have such a luxury, he said.

"With the first well termed moderately successful before being capped and the second well proving to be absolutely dry, the exploration and reservoir consultants advised us to dig deeper. This will see the present well intersect two potential reservoirs — one layer will have 2,500 metres and the other 4,500 metres," said the officer.

Significantly, the third well is located closer to the proven fields of Reliance Industries and ONGC, whose wells have already struck gas.

"The idea now is to work from south upwards and the present well is only 10 km off the boundary where it has the Reliance block on the south-east side and that of ONGC on the south. It could hold quite a few surprises in the shape of unknown formations. We will need to keep re-adjusting as the drilling gets on," he said.

Signs agreement with IOC

EVEN as Gujarat State Petroleum Corporation (GSPC) is pushing itself to the limit to prove itself in the Krishna-Godavari fields with an early gas strike, the company has entered into an agreement with Indian Oil Corporation (IOC).

The plan is to turn to IOC for funds if the KG project begins bleeding financially.

As a first step, an MoU towards securitising expenditure incurred on the KG basin project was signed during the recently held `Vibrant Gujarat' investment meet between the GSPC Managing Director, Mr D.J. Pandian, and the IOC Director, Business Development, Mr N.K. Nayyar. While details of the MoU are not known, the broad understanding is that IOC would pick up equity in GSPC's KG project in return for a stake in IOC's block in South Pars field of Iran or any of its exploration blocks in India.

The Gujarat company has already made clear its plans to explore opportunities for setting a third LNG terminal in the State either at Pipavav or Mundra in the Saurashtra-Kutch belt. This fits well with IOC's plans to develop the Iran field where it plans to set up a 9-million-tpa LNG liquefaction facility.

Meanwhile, it is learnt that GSPC has engaged the services of global consultants PricewaterhouseCoopers for valuation of its KG block. Though it is early days yet, the possibility of a special purpose vehicle being floated to execute the KG project is one option under consideration, according to sources. However, all this would change if the third well strikes gas, they hasten to add.

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