ONGC to acquire 80% in GSPC's KG basin gas block for $995 mn

State-owned Oil and Natural Gas Corporation (ONGC) is acquiring an 80-per cent stake in debt-laden Gujarat State Petrochemicals Corporation's KG basin gas block for $995.26 million.

Under the deal, ONGC will also acquire operatorship of the block KG-OSN-2001/3 in Krishna Godavari (KG) Basin offshore.

"ONGC Board today considered the proposal and approved acquisition of the entire 80 per cent Participating Interest (PI) of GSPC along with operatorship rights, at a purchase consideration of USD 995.26 million for Deen Dayal West Field in the Block," the company said in a statement here.

GSPC has already built significant production facilities like well head platforms, process-cum-living quarter platform, onshore gas terminal, export pipeline for transporting treated well fluid from process platform to onshore terminal etc.

ONGC will also pay part consideration of $200 million to GSPC towards future consideration for six discoveries other than Deen Dayal West Field, which will be adjusted upon valuation of the these discoveries subsequent to approval their field development plans by DGH / management committee of the block.

GSPC will obtain the requisite approval from the government for transfer of Production Sharing Contract of the block.

The acquisition of PI and operatorship rights in the block fits well with the ONGC's strategy to enhance natural gas production from domestic fields at a faster pace,  to reduce import dependence of hydrocarbons by 10-per cent by 2021-22. The trial gas production from Deen Dayal West Field has already begun.

Upon successful completion of the transaction, ONGC hopes to bring the field on commercial production along with the existing partners in the block.

Through a successful exploration efforts by ONGC, an HP-HT corridor of oil and gas is emerging in KG Basin. The Deen Dayal Field will act as a pivot in developing nearby HP-HT discoveries in Yanam and Godavari PML areas of ONGC, simultaneously. ONGC also finds opportunity to bring the Cluster-I gas discoveries of KG-DWN-98/2 NELP Block and adjacent nomination blocks on a fast track development through utilization of infrastructure of Deen Dayal West Field.

The engagement between ONGC and GSPC has set a pioneering example of synergy of strategies of government owned companies in upstream sector of oil and gas industry.

ONGC is the largest producer of crude oil and natural gas in India, contributing around 70 per cent of Indian domestic production. ONGC's market capitalisation as of 23 December 2016, was Rs247,700 crore ($36.47 billion).

During the financial year ended 31 March 2016, ONGC Group had produced 57.38 million tonnes of oil and oil equivalent gas (mmtoe) (approx 1.15 mmboe per day). The consolidated gross turnover was Rs1,42,927 crore ($21.83 billion), consolidated net profit was Rs14,124 crore ($2.16 billion) for the year 2015-16 and total oil and gas reserves were 2,022 mmtoe as of 31 March 2016.