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Pratim Ranjan Bose
Gaurav Raghuvanshi

Kolkata/Ahmedabad , Aug. 10

INDIAN Oil Corporation and GAIL (India) have approached Gujarat State Petroleum Corporation Ltd (GSPCL) for picking up a stake in the gas reserve identified by GSPCL in the Krishna-Godavari basin.

Highly placed sources in GSPCL told Business Line that National Thermal Power Corporation Ltd has approached the company for ensuring gas supply from the Krishna Godavari find.

Interestingly, in a major shift from its earlier proposal to tap the equity market (through an IPO) for commencing commercial production, GSPCL now plans to opt for the debt-financing route to develop the first phase of the project. The second phase may be financed through an IPO.

The State Government's decision to tap the capital market had been subjected to severe criticism from several official quarters, including the Director-General of Hydrocarbons.

The latter had described the announcement of the reserve size as premature.

GSPCL is targeting production of 4-5 million standard cubic metre of gas per day from its Krishna Godavari (KG) find by December 2007.

In February, the company had announced striking over 20 trillion cubic feet of gas reserve in KG-OSN-2001/3 block.

When contacted, the Managing Director of GSPCL, Mr D.J. Pandian, said, the decision on allocation of stake in the corporation, a state PSU, is a prerogative of the Gujarat Government.

"A number of companies have expressed their interest in picking up stake in the find," he said, refusing further details on the same.

While no official confirmation was received from IOC and GAIL in this regard,, sources in both the companies confirmed the news.

Incidentally, GAIL had entered into an agreement with GSPCL for marketing and transportation of the gas produced from the KG basin in February 2004.

Asked about the finance options for developing the project, Mr Pandian said the company has put its IPO proposal on hold till the completion of phase-I in 2007.

"GSPCL is a debt-free company. Out of an estimated outlay of Rs 1,500 crore for phase-I, we can generate close to Rs 1,000 crore through internal accrual in two years. The rest could be borrowed."

He, however, was categorical that the IPO route was ruled out altogether.

GSPCL, which is currently preparing a detailed feasibility report for the project, expects to submit the development report to the Director-General of Hydrocarbons latest by December.

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