An oil giant in the making

Print edition : March 28, 2003

The only State-government-owned company in the oil and gas exploration and production business, the Gujarat State Petroleum Corporation is geared to go global in the coming years.

LONG before the oil and gas sector was liberalised in 1991, the Government of Gujarat had set up the Gujarat State Petroleum Corporation (GSPC), in 1979, to pursue downstream projects in the State. But, driven by a growing demand for petroleum products, it took up upstream projects, extracting oil and gas profitably from wells abandoned by the Oil and Natural Gas Corporation (ONGC) in the onshore Cambay basin. It sank more wells in adjoining Hazira and Ahmedabad in collaboration with Niko Resources of Canada and other partners, and struck more oil and gas.

A petroleum refinery in Gujarat. GSPC was set up in 1979 to pursue downstream projects in the State. But driven by a growing demand for petroleum products, it took up upstream projects.-BY SPECIAL ARRANGEMENT

Recently, GSPC successfully bid for an offshore (KG-OSN-2001/3) block in the Krishna-Godavari basin north-east of Rajamundry (1,850 sq km) under New Exploration Licensing Policy (NELP)-III. The prognosticated hydrocarbon reserve in the allotted K-G block is estimated to be 3 trillion cu ft (TCF) as against 1 TCF in the Hazira gas fields.

In a consortium with Jubilant Enpro Ltd (JEL) and GeoGlobal Resources, GSPC entered into a production sharing contract with the Government of India (GoI), to drill about 19 exploratory wells in the continental shelf 10-400 metres deep over the next six years. The exploration is estimated to cost Rs.500 crores, with commercial production of gas going up from 4 million cubic metres per day (mmscmd) by the end of the second year to 14 mmscmd by the fifth year. Earlier, GSPC had signed 17 production-sharing contracts with the GoI in association with various foreign and domestic companies as consortium partners. It plans to drill 16 wells in Hazira, from March 2004. The production is expected to go up to 5.5 mmscmd by 2004-05. The company in association with Gas Authority of India Ltd. (GAIL) plans to drill seven exploratory wells in the Ahmedabad block, which has been estimated to yield 175 million barrels of oil and an equivalent quantity of gas. GSPC also holds 10 per cent stake in the highly prospective areas in Mumbai Offshore and Deep Waters Block in association with ONGC, GAIL and Indian Oil Corporation (IOC) as consortium partners. Drilling in this block is expected to start in 2003-04.

The company now plans to participate in the forthcoming round of NELP-IV to acquire more exploration areas. GSPC is the only State government-owned company in the oil and gas exploration and production (E&P) business. Its turnover is expected to go up from Rs.285 crores in 2001-02 to Rs.500 crores in 2002-03.

With the formation of four Special Purpose Vehicles (SPVs) in a span of less than five years for vertical and horizontal integration, GSPC has emerged as Rs.900-crore `Complete Energy Company'. It is geared to go global in the coming years with the establishment of the country's first and only e-exchange for the energy sector.

Over the years GSFMC has worked on fuel pricing and tariff analysis, development and negotiation of contracts such as gas sales agreements and gas transmission agreements, demand-supply analysis and forecasting and development of licences and concessions in the energy sector. It has conducted an `LNG study' for the development of the gas industry in Maharashtra and related regulatory framework. It included evolving a Gas Policy and developing a draft Gas Act for Maharashtra. It has also conducted an Energy Demand Census to estimate the energy demand in Gujarat and determine the energy consumption patterns. It helps buyers of industrial fuels to save heavy costs incurred owing to take-or-pay liabilities on fuels by bringing the demand-supply data of all the e-exchange members online. The exchange is being configured to offer spot trading of fuels. Other value-added features that will be available on this e-exchange include logistics tracking, pipeline capacity trading and electronic payment mechanism.

As soon as the regulatory environment for fuel trading comes in line with the dismantling of the Administered Price Mechanism, the e-exchange shall also offer exchange-traded derivatives with mark to market features for effective risk management against volatile international prices.

Gujarat State Petronet Limited (GSPL) was set up in 1998 to transport natural gas throughout the State, laying an extensive network of high-pressure pipelines under the Gas Grid Project. It is the only pipeline company in the country that operates on the Common Carrier Principle. At present it transports over 5 mmscmd of gas a day through its pipeline network to industrial users.

As part of its campaign to promote environment-friendly fuel, GSPC has ventured into supplying compressed natural gas (CNG) for the automobile sector and setting up 250 CNG stations in the State, and piped natural gas for domestic and commercial users.

Gujarat State Energy Generation Ltd (GSEG) was set up in 1998 to generate power to reduce the energy deficit, which is growing with every passing year. Its 156 MW gas-based combined cycle project was developed at a fast pace. It was conceived in May 1998 and its first gas turbine was initially synchronised in September 2001. It became commercially operational in December 2001.

The need to incorporate state-of-the-art, Internet-based services paved the way for the setting up of Guj Info Petro Ltd (GIPL) in January 2001. It is armed with `Category A' Internet Service Provider (ISP) licence, two earth stations and high-frequency `KU band'. Its clients' list includes Adani, Essar Steel , Shell, Alembic, Tata Teleservices, Niko Resources, Wilnet Online, Jindal Online, National Institute of Fashion Technology, the Centre for Environmental Planning and Technology, the Nirma Institute of Technology, Space Application Centre-Indian Space Research Organisation, the Gujarat Industrial Development Corporation and the Gujarat Electricity Board.

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