18-07-08 Gujarat State Petroleum Corporation (GSPC), fully owned by the Gujarat government, is planning to spend Rs 4,000 crore over the next three to four years to produce oil and gas from the block it discovered in the Krishna-Godavari (KG) basin off the Andhra Pradesh coast.
The company will raise the money through a combination of loans from banks, a possible public offer and through internal accruals.

"GSPC will invest around Rs 4,000 crore in the KG basin. A part of this may also be raised through a public offering," said Saurabh Patel, the minister of state for finance and energy in the Gujarat government. He added that GSPC was aiming to start producing gas from the block in 2010. The company has already spent around Rs 3,000 crore for developing the KG basin block.
Citibank, DSP Merrill Lynch, JM Financial, SBI Caps and Kotak Mahindra have already been appointed as merchant bankers for the public offering, which was initially planned for September this year.

Chief Minister Narendra Modi had said the company did not have any plans to raise money through the public offer.
"Our finances are strong enough," he had said. Senior officials in the government, however, clarified that the company's plans to offer shares to the public had been put off due to volatility in the markets. The 30-share benchmark Sensex of the Bombay Stock Exchange has dipped more than 72 % to below 13,000 points in less than seven months.

GSPC recently discovered gas in a new well (KG-22) in the Deendayal block, which it had won under the third round of the New Exploration Licensing Policy (NELP-III). Meanwhile, it was heard that GSPC is in talks with Adani Group and Essar Oil to jointly set up a five-mm-ton-a-year LNG import terminal at Mundra port.
"GSPC will hold 50 % stake. Adani may take 20-25 %," Gujarat Energy Minister Saurabh Patel told.

Talks are also on with Essar for the remaining equity but no agreement has been reached.
"Essar is looking at setting up its own terminal at Pipavav. But we continue to talk to them," he added.
For the remaining equity, state-run Hindustan Petroleum has also shown interest. GSPC's move is being considered bold given the fact that Petronet LNG, India's largest liquefied natural gas importer, is doubling capacity of its Dahej terminal, also in Gujarat, to 10 mm tons by 2010 and Shell-Total's Hazira terminal, also in the same state, will see its capacity being raised from 2.5 mm tons to 3.6 mm tons a year in the next few months.

India, Asia's third-largest oil consumer, is encouraging use of natural gas to control its oil import bill and rein in inflation but there is not enough supply to satisfy rising demand. Gas demand in India, at around 179 mm cmpd, is far short of the supply of about 95 mm cmpd (including LNG).
Supplies are expected to double by 2010 when KG-D6 reaches peak of 80 mm cmpd and flow of additional LNG. However, by them demand projections made by Petroleum Ministry see the need for about 230 mm cmpd of gas.

Gujarat chief minister saidthe reserves from the latest well alone were estimated at around 3 tcf.
"The reserves in the entire block are well over 20 tcf," the chief minister, Narendra Modi, said. The Directorate General of Hydrocarbons, the oil and gas regulator, had earlier said gas reserves in the block amount to 1.38 tcf. Reliance Industries' block, one of the largest discoveries in the country, in the same basin has reserves of 11.3 tcf.

Patel also said GSPC had booked a capacity of 10 mm cmpd in the gas pipeline that Reliance Industries is laying to transport its oil from Andhra Pradesh to Gujarat.
"As and when our production goes up, GSPC will explore possibilities of laying a new pipeline," the minister of state for finance and energy said. Modi added that 300 acres had been acquired in Kakinada, Andhra Pradesh, to build an onshore gas processing terminal.
GSPC has drawn a master-plan at a cost of Rs 8,000 crore for setting up city gas distribution projects in 40 cities in Gujarat, the company said recently.