The amount supplied will then increase to 33.5 MMscfd no later than 24 months after the date of the signing of this arrangement.
The gas supplied to GAIL will be from the company’s SGL field, within block RJ-ON/6. Indus Gas holds a 63% interest in the SGL field, with ONGC holding 30% and Focus Energy Limited 7%. Indus Gas has a 90% interest in the remainder of block RJ-ON/6.
The arrangement has been put in place based on confirmation that all conditions under the term sheet have now been satisfied. These conditions include:
Certification of gas reserves by director general of hydrocarbons of India (DGH)
Approval of SGL field development plan by management committee formed under the production sharing contract (comprising: ONGC, DGH, Indus Gas, Focus Energy Limited and Government of India nominees)
Confirmation from DGH regarding the gas reserves (recoverable) and the production profile for supply of at least 33.5 MMscfd of gas for a period of 12 years
GAIL management approval for laying a pipeline to connect to the seller’s facilities
Signing of gas sales arrangements between the downstream customers and GAIL.
GAIL will be responsible, at its own cost, for the installation of the pipeline from the SGL field to the end user, a power plant located in Ramgarh, Rajasthan. Ahead of commencing supply of the additional balance of 26.5 MMscfd of gas, Indus Gas and its co-ventures will be required to install a CO2 removal facility. Should a short fall of gas supply occur below the 90% of quantities agreed, the Sellers will be required to offer GAIL certain pre-agreed discounts.
With the additional supply of gas made possible from the SGL field, the Ramgarh power plant will be able to increase the amount of electricity it is able to produce from 110 MW to 270 MW. This arrangement with GAIL signifies the opening of a significant new commercial gas resource region in India. The Indus basin straddles eastern Pakistan, where it has proven to be a highly prospective area with a large number of oil and gas field discoveries, and western India, where until now the basin has remained relatively under-explored.
The development of the Indus basin in Western India and the connection of this area to the Northwest region of the Rajasthan State, via the approved GAIL pipeline, enables, for the first time, the effective supply of natural gas in significant quantities to this part of India and will help bridge the substantial demand / supply gap for electrical power in that region. The Rajasthan State, like all states in India, has a significant and growing energy deficiency for both domestic and industrial use and India, as a whole, currently imports over 70% of its resource requirements.
Commenting, Marc Holtzman, chairman of Indus Gas, said:
The commitment by GAIL to the installation of the gas pipeline, the signing of the sales arrangement by GAIL with a downstream customer and approval of the SGL field development plan are major steps forward for Indus Gas and also the development and supply of power in the state of Rajasthan. The arrangement will bring predictable and substantial long term revenues streams to the Company and its shareholders.
