Gujarat State Petroleum to merge three subsidiaries

Nov 12, 2003 01:00 AM

It's official. At a time when oil and gas companies are talking of unbundling their operations, the board of the Gujarat government-owned energy major Gujarat State Petroleum put a stamp of approval to bundle three of its subsidiaries into itself.
According to sources the board has given a go ahead to the merger of Gujarat State Petronet Limited (GSPL), Gujarat Info Petro Limited (GIPL) and Gujarat State Fuel Management Company (GSFMC) into GSPC. The board has, however, decided not to merge the power generation subsidiary of GSPC, Gujarat State Energy Generation Company Limited (GSEG).
"Post merger, the new entity would come out with an IPO to raise finances from the primary market," sources told.

The GSPC has been planning a mega-merger of its subsidiaries with itself to become a Rs 1,800-2,000 crore “complete energy company”. While GSPL is in the business of gas transportation and is setting up a 2,200 km gas grid in Gujarat, GIPL is the leading bandwidth supplier in the state and GSFMC is a fuel trading and consulting company. GSFMC has also set up an energy exchange for trading fuel on-line.
As for the rationale of the merger, sources say that it would help bring "synergy in the functions" of GSPC arms and would help GSPC claim depreciation benefits on the assets of its subsidiaries. "This would help this growing company save on critical finances for its future projects," they added.

GSPC is heavily dependent on its only oil and gas producing asset at Hazira at present, where it runs a 67:33 joint venture with Niko Resources of Canada. The total gas reserves at Hazira, as of June 2002, have been pegged at 19.9 bn cm.
GSPC also has plans to drill a number of wells in Hazira, Tarapur and Cambay off-shore basin. While GSPCL has a 50:50 joint venture with Baroda-based Hindustan Oil Exploration Company (HOEC) for Tarapur gas field, it has a 60:40 tie-up with public sector gas major Gas Authority of India (GAIL) for Block 14 in the Cambay offshore basin.

Moreover, GSPC is also pinning hopes on Krishna-Godavari oil and gas field, where it would require Rs 400-500 crore for field development. It also won three new oil and gas fields under the last round of New Exploration and Licensing Policy.
"GSPL has recently decided to increase the length of its gas grid and would require big ticket financing to lay down the network before LNG lands on Gujarat shores," sources said.

Source: Times News Network
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