ONGC risk to debt-free status after GSPC deal

Vol 20, PW 13 (23 Mar 17) People & Policy

ONGC is at grave risk of losing its enviable reputation as a debt-free company if, as expected, it turns to banks for financial help to close its GSPC deal.

GSPC wants ONGC to pay a single lump sum for its 80% stake and operator status at the struggling KG-OSN-2001/3 licence on the east coast. In December 2016, ONGC announced it would take GSPC's stake in the Deen Dayal gasfield for an upfront payment of $995.26m plus $200m for six additional discoveries.

"GSPC wants all the money at once," confirms an ONGC source. "They want an 'all cash' deal.

This will be a big strain on our balance sheet. You can imagine how it will affect us." Yet ONGC is in no position to hand over a lump-sum to GSPC.

Over the next three to four years it has approved expenditure of Rs76,000cr ($12.6bn) for current and future projects. "Most of this will be invested on the east coast," adds our source, referring to a Board decision March 28, 2016 to invest $5.076bn at KG-DWN-98/2.

By contrast, ONGC's cash reserves stand at just Rs9956cr ($1.6bn). "ONGC still hasn't decided whether GSPC will be paid with the cash reserves or through a loan," we hear.

"We might have to take a loan for this deal or take a loan in the future to fund projects that have already been approved."

LNG Summit