Gujarat State Petroleum Corp has put on hold its planned initial public offer due to choppy market conditions and would instead raise debt to finance development of its eastern offshore Krishna-Godavari basin gas finds.
GSPC plans to invest over Rs 5,000 crore (Rs 50 billion) in developing the eastern offshore gas finds that it believes hold a minimum of 1.4 trillion cubic feet of in-place reserves and a maximum of 5.6 tcf reserves.
"We are awaiting formal communication from the Government declaring our finds as commercially viable. Once we receive that we will submit a plan to development discoveries," GSPC managing director D J Pandian told reporters.
GPSC believes it will take two years from the date all approvals are in place, including the one for development plan, which details investments and volumes to be produced, for starting production from the block KG-OSN-2001/3 off the Andhra coast.
"As (Gujarat) chief minister (Narendra Modi) has already stated, the IPO is not being considered now," he said indicating the public offering may be made when the gas production starts.
GSPC, he said, would fund the development plan from its internal resources and borrowings.
"Many banks and financial institutions will be willing to finance us once development plan is approved."
The company had in July struck more gas reserves in the KG-22 well, which in Modi's assessment alone has three tcf of reserves.
The development plan under preparation is for earlier find in KG-8 well in June 2005.
GSPC will produce about 8-10 million standard cubic meters per day of gas from the block and has booked capacity in Reliance Industries' East-West (Kakinada to Bharuch) pipeline to transport it to Gujarat.
The company, which is 100 per cent owned by Gujarat state government, has put on back burner plans to sell 30 per cent stake to a foreign strategic partner like Chevron Corp.
While the KG-8 well had in 2005 flowed 10 million standard cubic feet gas per day during testing, the KG-22 well flowed 27.3 mmscfd. GSPC has till now discovered gas in four wells -- KG-8, 15, 16 and 22. It has so far drilled 11 wells, with the last well encountering technical problems.
The development plan being prepared was only for 15 sq km out of the 95 sq km shallow water block KG-OSN-2001/3, which has been since renamed as Deendayal block.
While GSPC is the operator and holds 80 per cent interest in the block, GeoGlobal Resources Inc and Jubilant Enpro have 10 per cent each.
The consortia was awarded the block in the third round of international bidding for oil and gas acreage under New Exploration Licensing Policy. GSPC has taken 10 mmscmd capacity in Reliance Industries' East-West pipeline to transport Deendayal block gas to consumers.
About 300 acres of land has been acquired in Kakinada in Andhra Pradesh for on-shore gas processing plant.