GSPC's Deen Dayal discovery, Part-VII: Management Committee declines to entertain GSPC's request for amendment of PSC for change in holding
GSPC's Deen Dayal discovery, Part-VII: Management Committee declines to entertain GSPC's request for amendment of PSC for change in holding pattern
The Management Committee of the block KG-OSN-2001/3 has declined to take a view on a request by the GSPC for expulsion of Geo Global Resources Barbados Inc (GGR) as a co-promoter in the block, claiming that the issue is beyond its purview.
GSPC had wanted an amendment in the existing PSC which would have rescinded GGR`s participation in the block on account of an alleged "default" in payment. This would leave GSPC with a 90% stake, once GGR's 10% stake supposedly devolves on GSPC, with the rest being held by Jubilant.
The operator had wanted GGR to be declared as a defaulter and sought that consequent amendments to the contract be carried out in accordance with Clause 6.11 of the PSC.
But GGR had claimed that it had a "carry" agreement in place with GSPC that seems to be "watertight". In this context, it will not be easy for GSPC to push through the amendment.
GSPC had previously intimated the ministry and the DGH that it had repudiated the Carried Interest Agreement (CIA) -- dated August 27, 2002, signed between GSPC and GGR -- as "void" and had declared that GGR had no participating interest in the block. However, GGR contested this argument.
To argue its case effectively, GGR had even expressed a desire to be represented by its senior management from Calgary, Canada. But now it seems that the case will have to be sorted out by the petroleum ministry itself.
This was expected. GSPC has politics to be satisfied on the CIA. I expect that once oil and gas start being produced, GGLR's carried interest expenses will decline rather quickly since GGLR's share of the revenues will be used to reduce their debt. By the time this issue is to be decided by the Petroleum Ministry, GGLR debt may have disappeared and the Carried Interest would no longer be meaningful.
In the meantime, Jubilant has been paying its 10% share of the high cost of GSPC's spending. Jubilant trades on the London exchange and their disclosure documents might have a different synopsis of the MC meeting.