GSPC wants 12-month extension at KG-OSN-2001/3

Vol 9, PW 24 (23 Mar 06) Exploration & Production

Gujarat State Petroleum is seeking a 12-month extension to Phase-I of its work programme at offshore KG shallow water block KG-OSN-2001/3.

PETROWATCH learns an application for the extension was submitted to the DGH early this month. GSPC is already in a six-month extension to the two-year Phase-I, which officially ended on 11th September 2005 but was extended till 27th March this year.

Will GSPC get the extension Refusal is highly unlikely because GSPC is production testing its fourth well and even the DGH now publicly admits that it has made a highly significant gas discovery. At the NELP-V roadshow in Delhi on 10th March, DGH boss VK Sibal pointedly included the GSPC discovery alongside those made by Reliance and Cairn as three of the most significant upstream developments in India in recent times.

Sibal told his audience of overseas and Indian explorers to closely watch the GSPC discovery because it had opened up a totally new area of exploration in the deeper Cretaceous sections previously ignored by geologists. Despite this, PETROWATCH learns the DGH is expected to attach a significant rider to its approval of another extension for GSPC.

Under new rules to be announced shortly, GSPC will be asked to relinquish 25% of the 1850-sq km block and submit a bank guarantee. Says a ministry source: Like any operator, they want to retain the entire area before entering Phase-II.

In its bid GSPC promised to drill 14 wells in Phase-I but has drilled only four. Questions are now being asked if it can drill ten more by March 2007, assuming it receives the extension.

GSPC is working on an ingenious argument to break free of its well commitment by claiming that its four wells drilled to date account for 50% of the compulsory 33,000 metres it is obliged to drill in 14 wells and, therefore, it should be required to drill only the balance. Unclear is if the DGH will buy this argument or another argument prepared by GSPC that part of the block lies in a wildlife sanctuary and environmental restrictions prevents drilling of all the designated wells.