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(Edited  Image Courtesy: Indus Gas)
 
It is now the turn of fringe players to be counted in the great Indian quest for domestic natural gas, which has the potential to catalyze ‘Make in India’ Initiative.
Ajay Kalsi group companies Focus Energy Limited (FEL) and Indus Gas Limited (IGL) are bracing to ramp up substantially gas production from RJ-ON/6 block in Jaisalmer district of Rajasthan. 
FEL has estimated an investment of Rs 11,050 Crores for next phase of appraisal and roduction of natural gas from Block RJ-ON/6, which is spread over 2,176 sq. km in Jaisalmer district of Rajasthan. Of the total area, 176 sq. km referred to as SGL Field started production of gas in July 2010.  
FEL, which has so far drilled 11 exploratory wells, has now proposed to drill 40 appraisal wells, 372 development or production wells in area other than SGL field. It also intends to set up gas processing facilities with capacity to process 65 million standard cubic feet (MMSCF)/day of natural gas. 
As put by a FEL document dated 29th April 2015, “We are the Operator of the Block to carry out exploration & production activities. In respect of Block RJ-ON/6 Area of 2000 sq. km., we are in process of appraisal activities and Field Development Plan will be submitted to Govt. Of India, MOP&NG in the 3rd Quarter of FY 2015-16 and thereafter the Mining Lease will be granted for carrying out development and production activities.”
Management Committee, comprising officials from Ministry of Petroleum & Natural Gas (MOP&NG), Directorate General of Hydrocarbon and RJ-ON/6 consortium, had approved 
Declaration of Commerciality (DoC) on 20th October 2013 for this 2000-sq km area (DOC area).
IGL, in its prospectus dated 12 February 2015 for $ 300m debt issue, says: “We plan to increase the production significantly at the SGL Field from 33.5 MMcf/d (million cubic feet per day) in the near to medium term. In addition, we are also working to finalize the development plan for the DoC Area in 2015. Once implemented, we expect the development of the DoC 
Area to increase our production significantly over the next three to five years.”
The Block has recoverable reserve of 872 billion cubic feet (BCF) of gas, according to a report dated 27th November 2014 prepared by Senergy (GB) Limited, a global independent consulting company specializing in hydrocarbons reservoir engineering.
Senergy Report, referred to as Competent Person’s Report, says that Phase I (42 MMscf/day) of the development plan has been completed with production from the SGL field.
 IGL thus currently supplies around 33.5 MMscf/d gas (net of CO2) to GAIL for ultimate sale to Rajasthan Rajya Vidyut Utpadan Nigam Limited’s (RRVUNL’s) 270-MW power plant, which is located about 100 km from SGL field.
As regards Phase II envisaging production of 72 MMscf/d, IGL is in advanced stages of negotiation with GAIL for additional supply of 72 MMscf/d for two separate projects. 
The first project provides for supply of 36 MMscf/d (28.8 MMscf/d net of carbon dioxide CO2) for supply to RRVUNL’s power plant, which is being expanded by an additional 160 MW. The power plant construction is likely to be completed by end 2015 and gas supplies should start early in 2016.
The report says that the second project envisages supply of 36 MMscf/d (28.8 MMscf/d net of CO2) for supply to a greenfield LNG plant being setup nearby. The LNG producer (name not disclosed in the report) is setting up a mini liquefaction plant of 421 ton per day. The core equipment of this LNG plant has been already constructed and is being shipped to India for onsite commissioning. The LNG plant construction is likely to be completed by end 2015 and gas supplies can start as early as 2016.
Under the Phase III envisaging production of 150 MMscf/d, IGL intends to sell gas to GAIL and other customers, who are already connected to existing National Gas Grid at various landfall points at Mehsana (Gujrat), Kota (Rajasthan) and Bhatinda (Punjab). 
FEL (formerly Phoenix Overseas Ltd) had won the block through a pre-NELP bidding competition way back in 1998.  The company has thus successfully re-invented itself as an upstream company after a series of bumps in the eighties relating to rupee-denominated trade with erstwhile Soviet Union.( http://nareshminocha.com/index.php/oil-gas/1056-phoenix-intends-to-set-up-refinery-units
FEL group has, however, spun a corporate veil through a web of companies, some of which are incorporated in tax heavens. 
LSE-AIM-listed IGL, is registered in Island of Guernsey, a tax heaven that forms part of Channel Islands. IGL’s holding company is Mr. Kalsi-controlled Gynia Holdings Ltd, which is registered in British Virigin Islands, a tax heaven in the Caribbean. Gynia is controlled by Multi Asset Holdings Company, whose place of incorporation is not available in public domain. 
IGL has 63% working interest in SGL Field and 90% working interest in remaining part of the Block. IGL has made its investments in SGL field and the remaining block through its two step-down subsidiaries – Mauritius-incorporated iServices Investment Limited and Cyprus-based Newbury Oil Company Limited.
In 2006, FEL had assigned the lion’s share of its stake/interest in the block to IGL subsidiaries, iServices and Newbury. 
Oil and Natural Gas Corporation (ONGC) has 30% working interest in SGL Field and has a right to acquire similar 30% stake in the remaining block.
FEL-IGL combine enjoys special fiscal privileges at the expense of ONGC, a legacy of flawed privatization of discovered & other blocks contrived by the Congress regime (P.V. Narasimha Rao Govt) in the nineties. 
As put by IGL, “ONGC is also the licensee of the Block and is obligated to pay, including our share of, all licence fees, mining lease fees and taxes/cess relating to production (except income tax) including royalty and cess accrued in respect of the Block.”
It says: “Gas produced from our Block is not bound by the new gas pricing regime because the Block was awarded prior to the implementation of the NELP regime. As a result, we are able to negotiate the price of natural gas with our customers without such price restriction. However, the Government’s price regime affects the overall natural gas market in India and sets a key benchmark for natural gas prices. The Government’s gas policy will affect the price at which we can compete in the market.”
 
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