Mumbai: The country’s largest oil exploration and production company, Oil and Natural Gas Corp. Ltd (ONGC), is in talks to buy five blocks from the Gujarat State Petroleum Corp. Ltd (GSPC), according to two people aware of the development.

The move comes against the backdrop of ONGC acquiring an 80% stake in GSPC’s Deen Dayal block in the Krishna Godavari Basin in December 2016 for 7,738 crore. The Gujarat government owns an 87% in GSPC.

“GSPC has decided to farm out all non-operated blocks and has thus approached ONGC to take complete ownership of the blocks that they are partners in. There are five such blocks. ONGC is evaluating the blocks," said one of the two people cited above, requesting anonymity. He declined to comment on the valuation of the blocks as talks are still on.

GSPC did not reply to an email till press time, while an ONGC spokesperson declined to comment.

GSPC holds a participating interest in 24 blocks, of which 20 are onshore and four offshore. Seventeen onshore blocks are producing properties. Of the 24 blocks held, GSPC is an operator in six blocks and a non-operating partner in 18. The blocks under consideration include four in Gujarat’s Cambay basin—CB-ONN-2004/1 (ONGC 60%), CB-ONN-2004/2 (ONGC 55%), CB-ONN-2004/3 (ONGC 65%), and CB-ONN-2009/4 (ONGC 50%)—and one in Mumbai basin, MB-OSN-2005-1 (ONGC 80%).

“ONGC has agreed to evaluate the blocks, but if it declines to buy, GSPC will seek the interest of other exploration and production companies. GSPC plans to close the sale by November," said the second person mentioned above, also requesting anonymity.

The stake sale is part of GSPC’s attempt to reduce debt on its books. The company had invested $3.5 billion (approximately 20,000 crore) in the Deen Dayal block, which burdened the company with debt. Sale proceeds from the block have been used to pare debt.

To further reduce debt, GSPC had revived its plans last August to sell stakes in 20 of its onshore oil and gas blocks. The company had in 2016, hired consulting firm EY to prepare a report on the blocks for the proposed stake sale.

“GSPC has been undergoing a business restructuring, advised by investment banker SBI Capital Markets. The sale of these blocks could be part of the same process," the second person added.

In March, GSPC sold a 28.4% stake in Gujarat Gas Ltd, its city gas distribution business, to its subsidiary Gujarat State Petronet Ltd (GSPL). This helped it reduce its 16,500 crore debt by more than 3,250 crore. Both Gujarat Gas and GSPL are subsidiaries of GSPC.