ONGC, GSPC in 'commercial discussions' on KG block: Pradhan

Rejecting Congress' charge of an attempt being made to "palm off" GSPC's failed gas fields to ONGC, Oil Minister Dharmendra Pradhan on June 3 said his "best wishes" are with the two firms if they are able to strike a commercial deal keeping their interest in mind.

State-owned Oil and Natural Gas Corp (ONGC) has been offered a stake in Gujarat State Petroleum Corp's (GSPC) Krishna Godavari basin block in an attempt to the Gujarat government firm's Rs 19,500 crore loan from turning into an NPA.

"I can only tell (Congress leader) Jairam Ramesh that exploration and production activities should not be seen in isolation," he told reporters here. "If they (UPA Government) had provided marketing freedom as guaranteed under the PSC, GSPC could have produced gas by now." The UPA government had fixed a cap on price of natural gas in contravention of the signed production sharing contract (PSC), which made developing the gas from the difficult field difficult.

Pradhan said company-to-company discussions were taking place on a possible collaboration between ONGC and GSPC.

"These are commercial discussions and my best wishes are with the two companies." "If they are able to reach a commercial understanding, keeping their profitability in mind, we must not have any problem," he said.

Ramesh had yesterday alleged that Pradhan was making attempts to "palm off" the KG gas block to ONGC to "protect" Prime Minister Narendra Modi.

Pradhan has virtually turned into an investment banker to force a "merger" between ONGC and GSPC's KG block and is making "outrageous claims" to justify such a course of action, he had said yesterday.

Since the BJP-led government took power in the Centre, Gujarat State Petroleum Corp Ltd (GSPC) is seeking to sell a majority stake in its KG-OSN-2001/3 (Deendayal) block in Bay of Bengal to Oil and Natural Gas Corp (ONGC), sources said.

GSPC was to begin gas production from the block in 2013 but after sinking in USD 3.6 billion it was found that gas reserves are one-tenth of 20 trillion cubic feet claimed in 2005 and that too is technically difficult to produce.

In the process it has amassed Rs 19,576 crore of debt, on which interest cost was Rs 1,804.06 crore in 2014-15, according to the CAG. And against this its revenue was Rs 152.51 crore in 2014-15.

Sources said GSPC has been doing trial production of a very small volume of gas from August 4, 2014 and has not yet reached commercial production and in absence of revenue commensurate with the debt servicing obligations it risks becoming a defaulter.

To bail out of the situation, a few weeks back it offered to sell 50 per cent stake to ONGC, they said.

GSPC is producing 0.6 million standard cubic metres per day (mmscmd) of gas from the field as trial production for almost two years now.

As per the approved field development plan (FDP), natural gas production was to reach 3.83 mmscmd in second year and achieve peak output of 5.24 mmscmd in the third.