The Hindu Business Line : GSPC applies for commerciality of KG block discoveries

Kolkata, June 16 Gujarat State Petroleum Corporation (GSPC) has applied to the Directorate General of Hydrocarbons (DGH) for declaration of commerciality of its discoveries in the KG basin block.

According to the application submitted last week, the discoveries may have a reserve of 1.6 – 5.6 trillion cubic feet (tcf) of natural gas. The DGH is evaluating the application.

The Gujarat Government PSU has so far struck gas in three wells KG-8, 15 and 16 in the block. According to sources, the company proposed to develop 15 sq km of the 95 sq km shallow water block KG-OSN-2001/3, renamed as Deendayal. Exploratory drilling is underway in the residual part of the block.

While a detailed field development plan will be submitted for due approval of the DGH once the commerciality is declared, preliminary estimates suggest that the GSPC may propose a production of 5-6 million standard cubic metre of gas a day (mmscmd) from Deendayal West.

Production may increase if the company strikes more commercial reserves in the eastern part of the block. According to sources, the geological and geophysical model developed so far point out that the reserve is more prolific in the Eastern part of the block.

Western block

When contacted, company sources admitted they had approached the DGH for commerciality of finds in the Western part of the block. “Once the commerciality is approved we will approach DGH with plans for fast track development of the same,” a GSPC source told Business Line.

GSPC has announced that it plans to part finance the development of the existing discoveries and the ongoing exploration activities in the field through a Rs 4,000-6,000-crore initial public offer (IPO) slated in end 2008. The company has appointed issue advisors in this regard.

According to sources, while the State Government is in the final stages of approving the IPO plan, the final reserve estimates and production plan of the field will have a bearing on the IPO pricing strategy.

Apart from IPO, GSPC is also raising Rs 2,000 crore of debt finance through a mixture of ECB and rupee loan.

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