Ahmedabad/New Delhi:Heramec Ltd plans to sell half its stake in the six onshore hydrocarbon blocks it co-owns in India with Gujarat State Petroleum Corp. Ltd (GSPC) to Calgary-based Stealth Ventures Ltd.
The move, if implemented, will help increase production from these blocks as Stealth possesses technological expertise for shale gas exploration.
Shale is a fine-grained sedimentary rock containing organic material, called kerogen, which, when distilled, can produce oil and gas.
Heramec is an operator with 30% stake in four blocks, and holds a 30% stake in the remaining two blocks where Hindustan Oil Exploration Co. Ltd is the operator. All the blocks are located in the Cambay basin and were awarded before India’s New Exploration and Licensing Policy (Nelp) was started in January 1999.
“The discussions have been on for a long time. The deal is valued at sub-$100 million (Rs 445 crore),” said a person aware of the development, who did not want to be identified.
Stealth plans to increase the field’s production by using horizontal drilling techniques in which a multistage hydraulic fracturing technique will be introduced to release hydrocarbons trapped between rocks, opening up a wider area.
Questions emailed to Stealth Ventures on Friday remained unanswered, and a senior Heramec executive who is involved in the deal declined to comment. Gujarat Natural Resources Ltd acquired Heramec in 2009 through its purchase of Sigma Oil and Gas.
The six producing blocks at Allora, Dholasan, Kanwara, North Kathana, Asjol and North Balol have a combined overall revenue of Rs 40 crore per year, and over the last five years GSPC has invested Rs 160 crore in them. GSPC said profit before tax from these fields has been negative and that in many blocks it has not even been able to recover the operating cost.
While a GSPC spokesperson declined to comment, a company executive aware of the development said on condition of anonymity that “GSPC is examining the deal if it is fitting into the present health of the reservoirs. We have also asked Heramec to exhibit the technology expertise of Stealth before DGH (Directorate General of Hydrocarbons) shortly”.
Interestingly, a Gujarat state government official requesting anonymity said that while Heramec may be trying to lower its risk by bringing in a third partner, GSPC itself is considering the option of buying the stake that Heramec wants to offload.
“Stealth will bring technical leverage with it, although their expertise is yet to be proven on-field,” said the GSPC executive. “Being a majority stakeholder in these blocks, GSPC will have to shell out the expenses accordingly, and this is our prime concern, especially since the fields are very unsatisfactory from the last two-three years. Also, no budget has been approved by DGH from the last two years for these blocks, and we do not know the exact potential of these fields.”
Once Stealth’s technology is approved, it will help Heramec and Stealth bid for shale gas blocks when these are auctioned in the near future. India plans to bid out shale gas blocks by the end of the current year.
While there are no official estimates of shale gas reserves in India, Schlumberger Ltd estimates them at between 300 trillion cubic feet (tcf) and 2,100 tcf. The north-eastern states and the Cambay basin are thought to have shale reserves. Given India’s growing dependence on energy imports, there is emerging interest in tapping energy sources that include shale gas and gas hydrates.