Oil | India’s top producer spends USD1.2bn to buy gas block

A petroleum refinery (background) in India

India’s biggest oil and gas producer will pay as much as USD1.2 billion to buy a majority stake in a gas field off the country’s east coast, aiming to boost production as the country seeks to cut energy imports.

State-owned Oil and Natural Gas Corp. Ltd.’s board approved the purchase of an 80 percent stake in Gujarat State Petroleum Corp.’s deepwater block in the Krishna Godavari basin, it said in a statement last week. The New Delhi-based company will pay $995.26 million for the Deen Dayal West Field, the largest discovery in the KG-OSN-2001/3 block, with estimated natural gas reserves of 1.1 trillion cubic feet.

It will pay​ another $200 million for six other discoveries in the block located in the Bay of Bengal. The block has likely total reserves of at least 11.2 trillion cubic feet, according to GSPC’s annual report for the year ended March 31.

“The acquisition fits well with the strategy of ONGC to enhance natural gas production from domestic fields on a faster pace,” the company said, adding that trial gas production from Deen Dayal West Field has already started.

The deal will help expedite production of gas from the block critical to achieve Prime Minister Narendra Modi’s goal of reducing import dependency of hydrocarbons by 10 percent by 2022.

The companies will share infrastructure and reduce costs in an area where both have spent or plan to spend at least $3 billion each. The deal is critical for GSPC, a company owned by the government of the western state of Gujarat, as it is at least four years behind schedule in starting commercial gas production despite having completed construction of a processing platform, gas pipeline and an onshore terminal.

ONGC said the acquisition will help it develop faster its discoveries in the Yanam and Godavari areas as well as gas discoveries in its KG-DWN-98/2 block. Saket Sundria, Bloomberg

Oil extends gains ahead of OPEC cuts

Oil extended the longest winning streak in more than four months before OPEC and other producing nations start reducing output to stabilize the market.

Futures advanced 0.4 percent in New York, climbing for a seventh session. Prices are set to recover next year as production cuts help to re-balance an oversupplied market, Saudi Arabia’s Energy Minister Khalid Al-Falih said last week. OPEC and 11 nations from outside of the group including Russia have agreed to trim about 1.8 million barrels a day next year.

Oil has traded near or above USD50 a barrel since the Organization of Petroleum Exporting Countries agreed last month to curb production for the first time in eight years. Iraq, the second-biggest OPEC producer, is fully committed to the accord, Oil Minister Jabbar Al-Luaibi said last week in Cairo at a meeting of the Organization of Arab Petroleum Exporting Countries.

“Current oil prices reflect positive factors we’ve been seeing recently, including expectations about output cuts by OPEC and non-  OPEC nations,” said Will Yun, a Seoul-based commodities analyst at Hyundai Futures Corp. “Questions remain on whether the rally will continue because unless there are new bullish items, the market may see more uncertainties in the long term.”