India’s state-run Oil and Natural Gas Corp. (ONGC) has signed a preliminary agreement to buy a stake, and assume operatorship, of Gujarat State Petroleum Corp.’s (GSPC) deepwater block in the eastern Krishna Godavari (KG) Basin.
“We have signed an MoU on October 4. This is a preliminary thing and we are looking into various possibilities. We have shared report [about gas reserves from] our consultant Gaffney, Cline & Associates with ONGC,” GSPC managing director JN Singh said last week.
The MoU provides for a panel of three experts to oversee the deal for the 1,850-square km KG-OSN-2001/3 block. The size of the stake is still to be revealed. GSPC holds 80% of the block, while Geo Global Resources and Jubilant each own 10%.
In 2005, Prime Minister Narendra Modi – then Gujarat’s chief minister – said GSPC had discovered 21 tcf (594.72 bcm) of gas at the 1,850-square km block. GSPC has since spent US$3.5 billion on developing the asset but has failed to start commercial production. In the process the company has amassed nearly 196 billion rupees (US$2.94 billion) worth of debt.
“There is a problem of high pressure and high temperature in completion/drilling of wells in the field,” upstream regulator Directorate General of Hydrocarbons (DGH) has said.
In May, Indian Minister of Finance Arun Jaitley said Gaffney, Cline & Associates had certified that the block held 14.4 tcf (407.81 bcm) of gas reserves, of which 7.6 tcf (215.23 bcm) was recoverable.
However, there are conflicting opinions over the amount of gas that can be extracted at KG-OSN-2001/3, with some reports suggesting that less than 2 tcf (56.64 bcm) is recoverable.
In September, ONGC’s chairman, D K Sarraf, said the company had hired US-based Ryder Scott to assess the block’s reserves. Sarraf added that ONGC’s investment could be “significant”.