Reliance Industries Ltd and its UK partner BP Plc, which are bringing a second round of gas discoveries to their KG-D6 block in the Bay of Bengal, had offered 5.5 million standard cubic meters per day of additional gas at auction for a flexible period. from 3 to 5 years old.
Gas user companies like Indian Oil Corporation (IOC), Reliance O2C, GAIL Gas, Adani Total Gas Ltd, Torrent Gas, Torrent Power and gas trading companies like GAIL, Shell and IGS have been locked in the war of Intense electronic auction bidding that occurred on May 5, sources from the Reliance-BP consortium said.
At the end of the intense bidding war, Reliance O2C walked away with 3mm / d of supplies, offering better prices than its competitors, they said.
India Gas Solutions (IGS) – a gas supply and marketing joint venture of Reliance and BP – took in another 1 mmscmd, while IOC got a similar volume. The remaining volume was taken by Adani Gas (0.15 mmscmd), IRM Energy (0.10 mmscmd), GAIL (30,000 cubic meters per day) and Torrent Gas (20,000 cubic meters per day).
This is the third auction that Reliance-BP has conducted on an independent third-party platform approved by the Directorate General of Hydrocarbons (DGH). CRISIL Risk and Infrastructure Solutions Ltd (CRIS) online electronic auction platform was also used for electronic auctions in February of this year as well as in 2019.
In all three auctions, Reliance-BP sold around 18 mmscmd of domestic gas from new fields in the KG-D6 block, which would help significantly reduce reliance on imported LNG, the sources said.
At the May 5 auction, Reliance-BP asked bidders to quote a price related to Platts JKM (Japan Korea marker), the benchmark valuation of liquefied natural gas (LNG) for physical cargoes at cash.
The lowest bid that could be placed was JKM minus $ 0.3 per million British thermal units. The highest acceptable bid would be JKM plus $ 2.01 per mmBtu.
The auction, they said, began with a reduction of $ 0.45 from the JKM price and intense competition led to the discovery of a price of JKM minus $ 0.6 per mmBtu (reduction of 0 , 6 USD from the current JKM price).
The intense competition indicates a preference for domestic gas over LNG for Indian consumers.
At current prices, the discovered price translates to a price of around $ 9 per mmBtu, but buyers will be required to pay only the ceiling or ceiling price the government has set for these fields.
The government sets a cap or ceiling rate at which natural gas from difficult fields like deep water can be sold. This cap for the period April 1, 2021 to September 30, 2021 is $ 3.62 per mmBtu.
Even though gas prices for April-September 2021 are capped by the government-notified ceiling price of $ 3.62 per mmBtu, the discovered formula would result in a price above $ 6 per mmBtu in the second half of the fiscal year and greater than USD. 7.5 thereafter, as the price cap will increase with the lag in international prices, they said.
Ceiling prices are set by the government on the basis of international prices in effect during the last 12 months with a three-month lag.
With the return of demand, international rates have rebounded, which will be reflected in prices during the second revision scheduled for October 1.
In February of this year, Reliance-BP sold 7.5mm / d of natural gas at a price of JKM minus 0.18 USD and in November 2019 it sold 5mm / d of gas at a price of between 8 , 5 and 8.6% of Brent crude oil.
Reliance-BP has developed three sets of deep water fields in the KG-D6 block – R-Custer, Satellite Cluster and MJ – which together are expected to produce around 30 mmscmd of gas by 2023, covering up to 15 per percent of India’s gas demand.
R-Cluster, which started production in December of last year, will have a maximum output of 12.9 mmscmd, while the satellites, which started producing a few weeks ago, would produce a maximum of 7 mmscmd. The MJ field will start production in the third quarter of 2022 and will have a maximum production of 12 mmscmd.
Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 – the largest of the batch – went into production from April 2009 and MA, the only oil field in the block, went into production in September 2008.
While the MA field ceased production last year, production of D-1 and D-3 ceased in February.
Other discoveries were either abandoned or removed by the government for failing to meet production start-up deadlines. Reliance is the operator of the block with 66.6% stake, while BP holds the remaining stake. ANZ BAL BAL