India's GSPC in talks with ONGC on selling gas field stake

By Nidhi Verma

NEW DELHI, May 9 (Reuters) - India's Gujarat State PetroleumCorp (GSPC) said on Monday it is in talks with the country'stop explorer Oil and Natural Gas Corp on selling astake in its gas block off the east coast, to revive thechallenging deep water field.

The block, where the discovery of gas was announced in 2005by Prime Minister Narendra Modi while leading his home state ofGujarat, was to start commercial production in 2011 butdifficulties in drilling 5,000 metres below the seabed pushedback the plan by about five years.

GSPC, controlled by the state government, has alreadyinvested about $3.6 billion in exploring and buildinginfrastructure around the block but with little success, and nowwants ONGC's help on funds and drilling expertise.

GSPC says it now hopes to start commercial production fromthe Krishna Godavari field later this year, with an initialoutput of 70-80 million cubic feet a day (mcfd).

"Commercial production is expected to start after thedrilling, hydraulic fracturing and completion of the fifthdevelopment well (D5), tentatively by the end of October," GSPCsaid in a statement emailed to Reuters.

ONGC declined to comment on talks with GSPC on buying astake in the block.

GSPC had managed to extract around 23 mcfd since August 2014from three wells it drilled using conventional drilling methods.

To expedite recovery, the company has now migrated tohydraulic fracturing (fracking) - a technique popularised byU.S. shale drilling companies and in which fractures are createdin rock formations using pressurised fluids. (http://tmsnrt.rs/276QRbw)

The fourth well is expected to start production by thisweekend using the fracking method, which would cost $60-$70million for each well and involve global oilfield services firmssuch as Halliburton and Schlumberger.

GSPC is also getting help from BP for a review of itsdrilling activity without cost, the company said.

Global petroleum consultancy firm Gaffiney, Cline andAssociates had estimated the block had in-place reserves of 14trillion cubic feet (tcf), with around 7.6 tcf recoverable.

India's upstream regulator had estimated recoverablereserves of 2 tcf from the block excluding the a part of southeastern area. (Editing by David Evans)