The Gujarat State Petroleum Corporation (GSPC) is a diversified oil and gas company that operates in the upstream, midstream as well as downstream segments directly or through its subsidiaries. GSPC’s operations are spread across the oil and gas value chain, encompassing exploration and production (E&P), transmission and distribution through various partnerships and joint ventures. The company owns and operates the largest gas transmission and distribution network in Gujarat and is one of the largest gas trading entities in the country. GSPC’s Dr J.N Singh (IAS) has been playing a proactive role in the company’s development. He is also the chief secretary of Gujarat. In the past, Dr Singh has held several important positions in various departments of the central government as well as the Gujarat government. In an interview with Indian Infrastructure, he talks about the performance of GSPC, the progress on the Krishna-Godavari (KG) basin blocks, current priorities, key challenges, as well as future plans…
How has GSPC fared in the past year (in the areas of E&P, pipeline connectivity, liquefied natural gas [LNG], city gas distribution [CGD], etc.)?
The GSPC Group is involved in the exploration of oil and gas, buying and selling of gas in bulk, gas transmission and CGD. The group has fared extremely well in buying and selling gas. Most of the business segments including LNG, CGD and gas transmission have also done quite well.
In contrast, the exploration business has not performed as well, where gas production from the KG basin has been a challenge. Fortunately, now we have come to a situation where the D4 well has started production and this has been quite a good experience for the company.
What are your views on the Hydrocarbon Exploration and Licensing Policy (HELP)? How would this impact your E&P business?
Frankly speaking, I am all for HELP. The government is quite aggressive regarding the policy. Particularly, in our case, for deep-sea exploration, the rate fixed by the government is expected to help in the long-term gas security of the country. Ultimately, the country has to depend on its own gas supply. Many geopolitical reasons such as global conflicts and tensions in West Asia can result in massive problems in the future. We cannot emphasise enough the importance of energy security in the country, particularly that of gas. Even at a higher cost, our own gas exploration should be given a boost. I certainly see this new policy as a very positive step by the government.
What is the progress on the Deendayal Upadhyaya block? When is commercial production likely to start in the block?
We are yet to start commercial production on the block. There are different wells in which we had started deep-sea exploration. The entire project was a great learning experience for the company.
In the D1, D2 and D3 wells, the company had some issues. But in the case of the D4 well, the concept of deep-sea hydrofracking was highly successful. The gas output is being monitored on a daily basis. We are now taking out about 16 million metric standard cubic feet per day of gas from the well.
Deep-sea hydrofracking in high pressure, high temperature conditions has been quite successful at the well. This is a first-of-its kind project in India where this process has been successfully used. On the whole, the Deendayal Upadhyaya block is seeing light at the end of the tunnel.
What has been the impact of declining crude and LNG prices on your operations? Do you plan to renegotiate your long-term LNG contract with the BG Group?
We are not impacted much by declining crude prices because the company is not in the business of selling crude directly. But crude prices do impact LNG and liquefied petroleum gas prices. Overall, the decline in crude prices is a positive development for the country. But from the company’s perspective, it is not particularly great news.
At the same time, for the CGD and gas transmission segments, we expect a boost in the market with the rates declining. This will certainly raise volumes, thereby increasing the bottom line and the top line, though margins will reduce.
Certainly, Petronet LNG has taken the lead by renegotiating the long-term contract with RasGas, Qatar. GAIL (India) Limited has benefited significantly from this and this has helped us as well.
Reportedly, the Oil and Natural Gas Corporation (ONGC) is in talks to buy a stake in GSPC’s KG basin block? What is the update?
Yes, we are in very serious negotiations with ONGC for the KG basin block. We expect to sign an MoU for the same very soon. That we are willing to go ahead with this is very much in the public domain. At a time when we are getting very positive results from the block, we do not have sufficiently deep pockets to sustain ourselves. Had the D4 success come two-three years ago, we would have never thought of this.
What are the company’s future plans?
Deep-sea exploration is one area where we would like to be more cautious. We would certainly like to look at good onshore fields or we may even consider offshore fields, but with a greater amount of caution. As far as the gas transmission business is concerned, we are developing the Mehsana-Bhatinda bulk transmission pipeline, which will provide a big boost to the CGD and gas transmission businesses in entire north India. Tenders for the pipeline project have been floated.
We are very optimistic and bullish about the CGD business. Currently, the GSPC group caters to about 33 per cent of India’s domestic consumers. We expect to double the number of consumers, from the existing 1 million to 2 million in the next one-two years. This is one area waiting to be exploited. Apart from Gujarat, where we plan to cover all the taluka headquarters, Bhatinda, Amritsar and Thane are some of the other places we expect to cover.
What are the key issues and challenges being faced by the company?
For the type of expansion that we are planning to undertake in the transmission and CGD businesses, there are issues in terms of both finances and manpower shortage. But, we are in a position to tackle them.
Certainly, exploration is one of the major financial challenges we are continuing to face.