ONGC, GAIL look to bid for Jubilant arm

Company with interest in Assam block is under insolvency resolution

Oil and Natural Gas Corporation (ONGC) and GAIL India may end up being the first public sector undertakings (PSUs) to take over a company undergoing an insolvency resolution.

Among big PSUs, Steel Authority of India and NTPC Ltd had in the past examined stressed assets to buy out their private owners.

According to multiple sources close to the insolvency proceedings, the two state-run majors are in the fray for JEKPL (formerly Jubilant Energy Kharsang Pvt Ltd), a subsidiary of Hari Bhartia-promoted Jubilant Energy.

The company, which filed for a corporate resolution under the Insolvency and Bankruptcy Code because it could not pay its dues to lenders, has a 25 per cent participating interest in the Kharsang block, located in Upper Assam and operated by GeoEnpro Petroleum Ltd.

“ONGC and GAIL have shown an interest in bidding for JEKPL,” said a person aware of the development.

According to the details filed before the Allahabad Bench of the National Company Law Tribunal (NCLT), Jubilant Energy has taken financial assistance from major banks, including Rs 200 crore from State Bank of India and Rs 525 crore from Central Bank of India.

The company is also a corporate guarantor for two loans given by EXIM bank to Jubilant Energy NV. One loan was for $50 million while the other was for $45 million.

In its petition to the NCLT, the company declared that it lacked the financial reserves to repay its debt. One of the above quoted sources also stated that other companies in the oil sector were keen to take control of the firm, which is nearing the end of its moratorium period. 

A resolution professional has invited bids from interested parties under the rules of insolvency.

“We are in wait-and-watch mode. The discussions are in their initial stages. We are looking at whether Jubilant can fit into our scheme of things,” said a GAIL official.

JEKPL’s account was classified as a non-performing asset on May 1 last year. Even its attempt to restructure the petroleum business with lenders’ help did not succeed. 

Of the seven blocks Jubilant Energy has, only two — the Kharsang Field and the Sanand Miroli Block — are oil fields that are producing. While the Kharsang field has been producing commercially since 1995, two wells in the Miroli area of the Sanand-Miroli block in Cambay started production in 2014-15.

In its petition, JEKPL said at the time of signing the production-sharing contract, output in the contract area stood at around 280 barrels of oil per day (bopd).

“However, after achieving the peak production, the contract area has been on a natural decline to current level of 1,000 (bopd),” it said. 

A major reason given by the company for its economic difficulties is the delay of seven years in getting government clearances while its contract is for 20 years.

In its annual report for 2014-15, the last one available, Jubilant Energy said the Kharsang field had 31.8 billion cubic feet of gas and 2.8 million barrels of prospective oil reserves. 

In 1995, when the production-sharing contract was signed, state-run Oil India had 40 per cent, Geopetrol International and Enpro India (now JEKPL) 25 per cent, and GeoEnpro Petroleum 10 per cent.

PSUs MAKING A PLAY FOR INSOLVENCY-HIT FIRM

• ONGC and GAIL among interested bidders in Jubilant Energy
• Company also a guarantor for two loans by EXIM bank to Jubilant Energy NV
• JEKPL classified as a non-performing asset on May 1, 2016
• SBI lent Rs 200 crore to JEKPL 
• Central Bank of India lent Rs 525 crore to JEKPL