State-owned oil and gas explorer Gujarat State Petroleum Corporation (GSPC), which has lined up its initial public offer (IPO) to the tune of Rs 3,066 crore, says development of its Deen Dayal West (DDW) field, may be delayed by a year.
The Deen Dayal gas field, in the Krishna Godavari (KG) basin, off the east coast of India, was discovered in June 2005 and awarded to GSPC under the third round of the New Exploration Licensing Policy. The field represents almost all of its gas reserves and most of its oil reserves, according to the company.
“We may be unable to complete the development of the project and commence commercial gas production by our estimated commencement date, June 2012. International energy consulting firm Gaffney, Cline & Associates Ltd has stated that production of gas by June 2012 is achievable, although given that tenders have not yet been awarded and fabrication has not yet commenced, the scheduled commencement date of production is ambitious,” the company said in its draft red herring prospectus filed with the Securities and Exchange Board of India.
The company will use the IPO proceeds to fund its existing projects and repayment of loans. Around Rs 1,200 crore will be used to fund the Deen Dayal project.
The Director General of Hydrocarbons has certified two TCF (trillion cubic feet) gas reserves in Deen Dayal.
At present, exploration is underway in the GSPC-operated block KG-OSN 2001/3 located in Deen Dayal West field and so far 16 wells have been drilled in the area.
The company has invested Rs 5,922 crore as of September 30, 2009, (including exploratory costs prior to the formulation of the FDP) in the KG block.
“The development costs and our estimated operational costs, as well as our current target of June 2012 for first commercial production from DDW, are subject to risks of raw material and equipment shortages, price increases above those anticipated and risks of an inability to procure or design the engineering services required. The field development plan estimates that DDW will cost a total of approximately Rs 8,000 crore ($1,801.04 million), of which Rs 5,649 crore ($1,270.61 million) would be required by the financial year 2013, which is when we expect to commence commercial gas production,” the company added.
According to the prospectus filed, the company is aiming to sell 448 million shares to raise Rs 3,066 crore.
The government of Gujarat intends to divest 16.70 per cent stake to the public, financial institutions and high net worth individuals.
GSPC had earlier diluted five per cent equity stake with a clutch of financial institutions and the Gujarat government-owned public sector enterprises, raising about Rs 900 crore.
The preferential allotment was done at the rate of Rs 81 a share to banks and financial institutions, including State Bank of India and IDBI Bank. The entities which picked up stake included IDFC, LIC, State Bank of India, Gujarat Mineral Development Corporation, Gujarat State Investment Ltd, Gujarat Industrial Development Board, among others.
GSPC has an international portfolio with exploration acreage in Egypt, Yemen and Australia.
L&T has won a critical offshore platform contract from GSPC valued at Rs 1,060 crore.
