Published on February 25, 2017

Sale of the Deendayal Upadhaya oil & gas block of Gujarat State Petroleum Corporation has moved a step closer. The board of directors at Oil and Natural Gas Corporation approved on Thursday the implementation of an agreement with the former.

Under the agreement, to be signed by the two companies, GSPC will have to buy natural gas from the block at a price of about $6 per million British thermal units. In the fifth year, the price would be $6.9 per mBtu.

If the government notified price ceiling for high pressure, high temperature gas is lower than the agreed price, GSPC will reimburse ONGC the difference. The Gujarat government will extend an agreement for the payment, said an official. The ONGC board had on December 23 decided to acquire the 80 per cent stake in the block, which had caused debt trouble for GSPC. "The two companies, after several rounds of discussions and legal due-diligence, have agreed to the terms and conditions to be incorporated in the farm-in/farm-out agreement," ONGC stated.

The board also approved on Thursday the development of five projects with an aggregate investment of Rs 7,327 crore, to lead to production of 14.969 million tonnes (mt) of oil and 2.972 billion cubic metres (bcm) of gas.

This includes development of the Ratna R discovery at a cost of Rs 4,105 crore. The R-12 field was discovered in 1979 and put on production in 1983, continuing till 1994. The government awarded the contract for development of the Ratna and R-Series fields in 1996 to an Essar Oil-led consortium in a competitive bidding round. However, the contract could not be signed due to various issues.