Block KG-ONN-2004/1: DGH accepts BG submitted by OIL on behalf of GeoGlobal
Sept 19: The DGH has provisionally accepted the bank guarantee (BG) submitted by OIL on behalf of its partner GeoGlobal Resources (GGR) in the block KG-ONN-2004/1.
The BG has been accepted by the upstream regulator subject to regularization of the transfer of 10% stake from GGR to OIL.
The issue of transfer of 10% stake -- which arose after GGR expressed its inability to pay outstanding cash calls and furnish a fresh bank guarantee -- in the block has been hanging for a long time.
The DGH has been pushing the contractor to make payments since May 2012, but the requests seem to have fallen on deaf ears.
As not submitting the BG would have led to termination of the PSC, OIL decided to pick up the 10% stake to keep the block alive.
Accordingly, OIL furnished the BG (10%) on behalf of GGR's share for FY 2013-14.
The BG submitted by OIL on behalf of GGR has provisionally been accepted by the DGH, subject to finalization of the transfer of 10% stake from GGR to OIL.
The DGH has asked OIL to submit certain documents as per the requirement of Article 28 of the PSC, so that the transfer of 10% stake can be regularized. However, the operator OIL is yet to submit the required documents.
There goes GGLR. It seems that GGLR has just handed over its future. The 10% share of the onshore block had the most prospective value for the company and was worth a bundle. This news report suggests that GGLR received nothing for it. The shareholders have been truly let down.
If the 10% share was worth a bundle, why didn't someone buy it from GGLR? Do you think OIL wouldn't allow it to happen? They wanted a partner to put up its share of costs.
Is it possible that GGLR can appeal to the Canadian gov't to for money for KG-Onshore in return for a pledge of future GGLR cash from DD? Then GSPC would be going up against the Canadian government as well as GGLR. Would they want to do that? I think not.
The question at the time was, would it be better to hand over DD to GSPC in return to be allowed to sell Cambay and finance KG Onshore? Joyfull, what would you say? Why wouldn't that still be available to GGLR now.
Two year ago, there was speculation over how much GSPC would pay for GGLR's 10% of DD. It ranged from $40 million to $150 million, I think. I would have to believe that was nonsense, that there was nothing on the table.
As far as its future, isn't it still with DD even though it may take a while for GSPC to recover its costs? We can see why JPR went with DD. He gets 1/2 of the benefit from DD.
Why can't GGLR pledge future DD cash flow? GSPC can't delay forever on the project. They must start delivering gas. At that point, a projection can be made on when GGLR can expect cash flow. Is there still doubt in the minds of lenders that GGLR will ever be allowed to receive a penny from it? How much does GGLR need to put up for KG-Onshore? Would OIL accept GGLR's share or are they just glad to get the last 10% for free?
The only shot GGR had after the Sara & Myra failures was to sell Cambay. GSPC would not allow the sale to go through unless GGR gave up KG Offshore. The money from the sale could have financed several wells for KG Onshore. JPR was adamant about keeping KG Offshore at all costs. He got his wish.