GSPC almost disqualified for KG-OSN-2001/3 bid
GUJARAT PETROLEUM SHOULD consider itself lucky! We understand the DGH almost disqualified its bid for NELP-III block KG-OSN-2001/3 when bids were submitted on 28th August.
Concern centred on three issues: GSPC's declaration of its 'Net Worth'; plans to privatise the company; and suspicion over its choice ofGeo Global Resources of Canada as a partner. Problems began when GSPC submitted audited accounts for only two years, not three.
Argument then raged over GSPC's estimate of its 'Net Worth', with the DGH contesting the use of 'Share Application Money' in the calculation. Only if the 'Net Worth' is positive does the DGH consider a company capable of meeting its financial obligations under the PSC.
Another concern centred on plans by the Gujarat government to privatise Gujarat Petroleum. Former GSPC managing director Sanjay Gupta drew up a plan to sell a 60% stake in GSPC but this wasshelved when he was removed as managing director.
The oil ministry is aware of this plan and wanted to be extra cautious: if GSPC became a private company, it would lose the benefits of being a state-owned company, including the significant advantage of not having to submit a bank guarantee. More, private oil companies come under closer scrutiny than state-owned companies.
Finally, we understand the oil ministry feels GSPC's partner Geo Global is a companyset up recently and with little or no experience in the hydrocarbon sector. In fact, the prevailing view is that Geo Global is a "front company" for Indian investors.
Despite these concerns, it's widely expected that GSPC will be awarded this block when the formal announcement is made.