Gujarat State Petroleum Corporation’s first phase financing of the development of its KG Block will begin to open up the largest gas discovery in India to commercial use. GSPC discovered the roughly 20 trillion cubic feet of gas in the Krishna Godavari Basin in 2005, eclipsing Reliance Industries’ 14 trillion dis­cov­ery in the basin in 2002. GSPC’s discovery is desig­nated as block KG-OSN-2001/3, and the block is located in shallow waters off the eastern coast of Andhra Pradesh, spanning over 1,850km2. GSPC owns an 80% participating interest in the block, while Jubilant Enpro and Geo Global Resources own 10% each.

The gas field is being developed in phases, the first of which is Deen Dayal West (DDW). DDW covers 15km2, with probable reserves of 1.65 trillion cubic feet of gas and 41 million barrels of oil/condensate. The infrastruc­ture for the project includes an offshore wellhead platform, a central processing platform, a sub-sea pipeline for gas trans­por­tation, and an onshore gas processing plant. The contracts for the various facilities are being tendered separately under a multi-contract structure. On completion of DDW, GSPC intends to develop Deen Dayal East and North as the project’s second phase, using DDW’s infrastructure as hub for gas transportation.

The total estimated cost of developing DDW is Rs79.7 billion, spread over 5 years. This is mainly comprised of Rs57.5 billion of pre-production project costs, covering the first 2.5 years. Post-pro­duction costs will be financed at a later date under a separate deal.

SBI Capital arranged the Rs30 billion 10-year term loan for the pre-production expenses. The loan has a four-year grace period, with drawdown spread over the first two years. SBI Capital opened syndication for this loan at the start of August, and closed syndication just two months later on 8 October. SBI Capital syndicated the loan to 14 banks, with strong market appetite resulting in a 2x oversubscription. SBI Capital is in the process of arranging a second Rs10.05 billion tranche, which will complete the project’s total debt requirement.

The Rs30 billion term loan is priced at 90bp over the banks’ various base rates. The SBI base rate, for example, currently stands at 8%. GSPC also has the option to reduce or refinance 30% of the first loan through ECA or multilateral borrowing. GSPC invested Rs7.55 billion in equity in the project, and SBI Capital is arranging a further Rs10 billion through a private equity placement. This will put the project’s debt to equity ratio at 56:44. 

GSPC DDW Gas Field
Status: Closed 8 October (First debt tranche).
Size: Rs57.7 billion.
Location: Off the coast of Andhra Pradesh, India.
Description: Pre-production costs for gas field infrastructure.
Sponsor: Gujarat State Petroleum Corporation
Lead arrangers: SBI Capital Markets.
Participants: Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Centra Bank, Dena Bank, Indian Overseas Bank, Punjab & Sind Bank, Union Bank of India, Vijaya Bank, Export-Import Bank of India, Indian Bank, Syndicate Bank, UCO Bank.
Lender legal counsel: Amarchand & Mangaldas & Suresh A. Shroff
Sponsor legal counsel: GSPC’s own legal team.
Financial adviser: SBI Capital Markets.