ONGC not to buy out private partners of GSPC even if deal is inked

Even if ONGC is able to close out its deal to buy 80 per cent of the Gujarat government’s GSPC stake in the DDW fields in the Krishna-Godavari Basin in FY18, it does not plan to buy out its private sector partners. An ONGC executive, requesting anonymity, said Jubilant Enpro and Geo Global Resources — having a 10 per cent share each — will continue to remain participatory interest (PI) partners and profit-sharing contract will remain the same. “They were PI partners with GSPC from the outset and were investing some money of their share for development of the field through cash calls. They remain where they were and will have to pay cash calls and will get 10 per cent of the revenue each. We will not take that (20 per cent) share,” said the executive.

ONGC’s board in February had approved signing of definitive agreements to buy debt-laden GSPC’s entire 80 per cent stake in the KG Basin natural gas block for $1.2 billion. It will pay $995.26 million for three discoveries in the KG-OSN-2001/3 block that are under trial production since August 2014.

An additional $200 million will be paid for six other discoveries for which GSPC has been finalising an investment plan to bring them to production. However, the deal closure will take time. “We have signed the farm-in/farm-out agreement and GSPC needs to fulfil certain conditions before closure actually happens. They have to get the right of refusal from the partners. As soon as they fulfil the condition precedent of the contract, closure will happen. They have sought a time of six months from the date of signing of farm-in/farm-out agreement date of 10 March,” said the executive. GSPC has also kept a clause that if conditions are not fulfilled within six months, it should be automatically given six more months. The approval for the deal was given in December. ONGC will keep raising cash calls on the partners for future investments as per their share. “We will be working on the existing work plan and have not thought of future capital investment. The partners will have to invest capital when required, else they will by default exit. But we will not forcefully make anyone exit,” added the executive.

ONGC has got an assurance from the Gujarat government that it will get at least $6 per million British thermal units for the gas from the DDW in the first year of production. The assured price will see staggered increments every year — it will touch $6.9 per mBtu in the fifth year and remain at that level during the remaining life of the asset.

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