According to the new rules of the government, Reliance is re-auctioning the gas.
Reliance Industries Ltd and its partner BP Plc have resumed auctions for the sale of natural gas from their eastern offshore KG-D6 block after the government incorporated new marketing rules to give first priority on supplies to city gas companies selling CNG. has started.
Reliance and its partner BP Exploration (Alpha) Ltd (BPEAL) will sell 6 million cubic meters of gas per day in the e-auction to be held on April 3, said a tender notice. The price is indexed to the global LNG marker, JKM, but will be subject to a ceiling price notified by the government.
The partners originally planned the auction in January, but days before that, the Ministry of Petroleum and Natural Gas on January 13 announced new rules for the sale and resale of gas produced from discoveries in deep-sea, ultra-deep water and high pressure. published. Areas of high temperature.
Due to this the auction was suspended and now it is being resumed after incorporating the changes.
The gas produced from wells drilled beneath the seabed is used for power generation, fertilizer making or converting to CNG to power automobiles or used for cooking as well as piped into domestic kitchens in industries.
As per the new government rules, bidders will have to indicate in advance whether they intend to procure gas through the auction ‘for their own use as end consumers (including use by their group entities) or as a trader. Were staying
While end consumers were allowed to resell any unutilized gas, traders participating in the auction were allowed to resell subject to a maximum trading margin of ₹200 per thousand cubic metres.
“In any event, which may require proportionate distribution of the gas offered under the bidding process, the Contractor (Gas Selling Company) shall distribute the gas to the bidders belonging to CNG (Transport)/PNG (Domestic) sector, Fertilizer, LPG and Electricity. sectors in that order,” the ministry had said, adding that any leftover gas would be offered to other bidders.
In addition to incorporating the changes in their tender, Reliance and BP have extended the term of the supply contract to 5 years instead of 3 years, offering the January auction.
It has been said in the tender that the supply is to start from April 16.
It said city gas distributors selling CNG to the transport sector and piped natural gas to domestic cooking would get top priority in allocation of gas in the event of a tie for any bid, followed by fertilisers, power plants and end consumers. /traders will be placed in this order.
In the January auction, the gas was meant to be sold to consumers who were not allowed to resell any unconsumed gas. Also, there was no clarity on the participation of traders.
The two partners have now invited bids for the sale of 6 MMSCMD (million metric standard cubic meters per day), or one-third of the volume to be produced at KG-D6, beginning April 16, 2023, according to the tender document. According.
Users such as city gas operators who convert the gas to CNG for sale to automobiles and pipe it to domestic kitchens for cooking purposes, or power plants that use it to generate electricity, or fertilizer units Those who use it to make urea have been asked to quote a premium they are willing to pay over the JKM price.
JKM is the Northeast Asian spot price index for delivery of ex-ship LNG to Japan and Korea. The JKM price for May is around 13.5 USD per million British thermal unit.
Bidders have been asked to quote the variable ‘V’ in the gas price formula ‘JKM + V’.
The opening bid for ‘V’ was initially set at USD (minus) 0.30 per MMBtu, but was later changed to USD (minus) 0.42.
The tender document stated that each bidder was required to submit a bid greater than or equal to the opening bid.
The maximum valid bid for ‘V’ was initially kept at US$ 5.01 per MMBtu, but later it was changed to US$ 2.01, after which the bid will not be accepted by the e-bidding portal.
The gas price will be lower of the ceiling price fixed by the government for gas produced from deep sea fields or the price received in the bid. The ceiling price for the six months ending March 31, 2023 is USD 12.46 per MMBtu and is not expected to change much for the next six months period.
In May last year, Reliance-BP auctioned 5.5 mmscmd of incremental gas from new discoveries in the KG-D6 block, benchmarking it to the same JKM gas marker.
Three-fourth of that volume was raised by Reliance and its affiliates. The discovered price in that e-auction came at a USD 0.06 discount to the JKM (Japan-Korea Marker) LNG price.
Earlier, both had sold 7.5 mmscmd of gas to JKM at a discount of $0.18 per mmBtu.
The government sets a cap or ceiling rate at which natural gas from difficult areas such as the deep sea can be sold. The cap is US$ 12.46 per MMBtu for the period October 1, 2022 to March 31, 2023.
Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 – the largest in the lot – were brought into production in April 2009, and MA, the only oil field in the block, was brought into production in September 2008.
While the MA field ceased production in September 2018, production from D-1 and D-3 ceased in February 2020.
Since then, Reliance-BP has been investing USD 5 billion to bring into production three deepwater gas projects in block KG-D6 – R-Cluster, Satellite Cluster, and MJ – which together account for about 15 per cent of India’s gas reserves. is expected to complete. Gas demand till 2023