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Richa Mishra

In favour of Canadian partner Geoglobal Resources

New Delhi June 14 State-owned Oil India Ltd (OIL) is likely to dilute its stake in an East Coast onshore exploration block acquired under the New Exploration Licensing Policy (NELP) round.

The company plans to reduce its stake in favour of Canada's Geoglobal Resources Inc, OIL's partner in the Krishna Godavari block, subject to the Canadian firm fulfilling certain requirements.

A senior company official said, "We have received a proposal from our partner in the block, Geoglobal Resources Inc, for increasing their stake by 15 per cent. This is as per an understanding reached between OIL and Geoglobal before we had bid in the sixth round of NELP."

While Geoglobal holds 10 per cent participating interest in this block, OIL as the operator holds the remaining 90 per cent.

Prior to submission of the NELP-VI bids, OIL and Geoglobal had entered into an agreement to increase the Canadian firm's stake to 25 per cent, subject to the availability of sufficient networth and Government consent. "We are examining Geoglobal's proposal," he said adding, "If Geoglobal meets Government norms for raising its stake then we would approach the Ministry."

Block KG-ONN-2004/1, also referred to as Block 28 under NELP-VI, is said to be a prospective area and the company plans to start exploratory activities at the earliest, sources told Business Line. This block covers approximately 548 sq km onshore in the KG Basin. The production sharing contract for the onshore KG Block 28 provides for work commitments to be met in two phases over an exploration period of seven years, with four years under phase I and three years in phase II.

The work commitment in phase I includes reprocessing of 2-D seismic, conducting gravity and magnetic as well as geo-chemical survey, a seismic acquisition programme consisting of 3-D seismic and the drilling of 12 exploration wells to various depths between 2,000 and 5,000 metres. In phase II, the consortium is to drill one exploration well to a depth of 4,600 metres.

OIL, which is mainly into onshore exploration, is targeting production of six million tonnes of crude oil by 2012, of which 1-1.5 million tonnes is expected from its overseas assets. The company's current production is 3.2 million tonnes.

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