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Oilex proposes to buyout GSPC in Cambay oil block

NEW DELHI: Australia-based Oilex has offered to buyout Gujarat State Petroleum Corp Ltd (GSPC) in a Cambay oil and gas block after work got stalled due to Gujarat government firm's refusal to pay its share of expenses.

Oilex, which holds 45 per cent interest in the Cambay field in Gujarat, is unable to carry out its committed work of drilling two wells this fiscal after GSPC refused to fund its 55 per cent of the USD 38 million budget.

The programme, approved by a DGH-headed oversight panel, would help open up the onshore Cambay basin that the US-based EIA estimates to hold a inplace resource of 30 trillion cubic feet of gas and 2.7 billion barrels of oil.

While the work programme was approved at the beginning of the fiscal, GSPC in October stated that it cannot fund its share as part of the company's overall programme of not putting in any further money in upstream oil and gas exploration and production business, sources privy to the development said

Oilex through its initial exploration has established contingent resources of 720 billion cubic feet of gas and 52.8 million barrels of condensate (oil) in the Cambay whose geology is similar to the Marcellus shale formations of the US.

GSPC's refusal will not just push back investment but also halt the programme that would have increased domestic gas and oil supply from the onshore Cambay basin, leading to increased royalty for the Gujarat government and directly offshore energy impors, sources said.

Sources said as a way out, Oilex has proposed three plans -- GSPC pays outstanding amount due and agrees to proceed with current work programme. Alternatively, GSPC sells some or all of its interest in the Cambay project to Oilex to allow the project to move forward.

As a third alternative, Oilex can issue a default notices to GSPC, resulting in Gujarat government firm losing its equity interest.

Under the Production Sharing Contract (PSC), each of the contracting party is supposed to fund its share of approved annual work programme or budget. Any default on that count can lead to disqualification and ouster from the contract.

Sources said Oilex has already raised funds from lending institutions to meet its shares of work programme requirement.

GSPC owns Oilex USD 7.7 million in past dues.

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