Canadian oil and gas explorer GeoGlobal Resources is looking at selling its stake in four Indian hydrocarbon blocks to Canada’s Fire Creek Resources, according to two officials close to the development. The transaction with Fire Creek Resources, which includes the blocks in Tarapur, Ankleshwar, Sanand-Maroli and Mehsana in Gujarat, is worth about $50 million, an official of GeoGlobal said requesting anonymity. Gujarat State Petroleum Corp (GSPC) is a partner or operator in all these blocks where the exploration activity has been completed.
In a letter to GSPC last month, GeoGlobal informed GSPC that it is in advanced talks to sell stake in the four onshore blocks to Fire Creek, said a senior government official on condition of anonymity. The development also comes at a time when GeoGlobal’s co-founder and director, Jean Paul Roy, who was spearheading the Indian operations and once led GSPC’s technical team, has resigned. GeoGlobal had raised close to $70 million in the US through a public offer in 2002, of which it claims to have spent $45-50 million in developing the Indian blocks.
GeoGlobal has 10 production-sharing contracts in India. It also has three licences in Israel and two in Colombia for exploration and production. The deal with Fire Creek does not include the Deendayal block in KG basin in Andhra Pradesh, which is at the centre of a long-standing dispute between GSPC and GeoGlobal.
In the Deendayal block, about eight small and big discoveries have been made so far. The Directorate General of Hydrocarbons has certified that DD-West field in the block has recoverable reserves of about 2 trillion cu. ft of gas. GSPC aims to start production from this field from mid 2013, an extension of at least two years. GSPC has spent at least Rs8,000 crore on exploration and production in this offshore block. Both GSPC and GeoGlobal blamed each other for the cost overrun.
'The initial estimate was close to $110 million, but went well over $1.5 billion,' said a GSPC official, requesting anonymity. GeoGlobal said in February that a new management team has taken over.
GeoGlobal troubles started in 2005 when GSPC blamed GeoGlobal for a breach of agreement. The Gujarat government claimed that GeoGlobal had failed to pay a sum of more than $150 million to GSPC for exploration. GeoGlobal argued that according to the agreement it was only a carried forward partner and it has no right on the gas produced till GSPC, the operator of the block, recovered the amount spent on exploration and production activities.
In India, GeoGlobal is banking on the success of onshore block KG-ONN-2004/1 where it is in partnership with Oil India Ltd. Currently, operator Oil India and GeoGlobal control 90% and 10% stake, respectively, in the block. GeoGlobal aims to raise the stake to 25%, according to the GeoGlobal official cited earlier.
