Modi tells GSPC to make peace with GeoGlobal

Vol 15, PW 2 (28 Jul 11) People & Policy

Gujarat chief minister Narendra Modi is playing peacemaker between Canadian explorer GeoGlobal Resources and GSPC, partners at the Deen Dayal discovery block KG-OSN-2001/3.

PETROWATCH learns Modi last month (June) instructed block operator GSPC to settle a longstanding $150m ‘carried interest’ dispute with GeoGlobal over exploration costs at the block. GSPC wants GeoGlobal to pay around $150m or 10% of the total $1.5bn spent on exploration work at Deen Dayal to date, in line with GeoGlobal’s 10% stake in the block.

But GeoGlobal strongly contests this demand, citing a Carried Interest Agreement signed between the two companies in 2002, which clearly states it must be ‘carried’ for its share of exploration costs. Yet Modi’s intervention seems to have persuaded GeoGlobal to concede and reverse its earlier stance.

Rumour is rife that the Canadian company plans to raise money from the market, or sell its 10% stake in Deen Dayal so it can pay GSPC. “GeoGlobal has been talking to a UK-based company since June to sell its 10% stake in Deen Dayal,” claims an industry source.

“Senior managers from GeoGlobal’s India office travelled to (its headquarters in) Calgary for 15 days. They met representatives from the UK-based company and shared details of the block.

” Our source refuses to disclose the name of this UK-based company, but believes GeoGlobal could complete a stake sale transaction by September. GeoGlobal will happily accept an offer of $190m, he adds, for its 10% stake even though it is worth at least $400m.

“GSPC has valued its 80% stake in Deen Dayal at $4bn,” we are told. “GeoGlobal could ask a lot more than $190m for its 10% stake.

But it is ready to sell cheap to exit the block.” GeoGlobal and GSPC declined to comment.

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