Reliance Industries and its partner UK’s BP Plc invited companies to bid for incremental gas it plans to produce from the second-wave discoveries in the KG-D6 block, pricing them for the very first time against an international gas benchmark.
While Reliance-BP had in November 2019 sold the first 5 million standard cubic meters per day of gas from the R-Series field in the KG-D6 block, the duo has now invited bids for 7.5 mmscmd of incremental output that is likely to be available from February next year, according to a notice inviting offer.
They have priced the first 5 mmscmd of gas against Brent crude oil but now they are seeking rates equivalent to JKM or Japan/Korea Liquefied Natural Gas Import Price.
Bidders have been asked to “quote the variable denoted as ‘V’ in USD per million British thermal unit (MMBtu) terms.”
“The gas price (in USD/MMBtu (GCV)) shall be = JKM + V,” the notice said.
JKM averaged USD 6.20 per MMBtu in November and at the base or cut off price, KG-D6 gas would cost USD 5.9 per mmBtu.
This is higher than USD 4.2 to 4.4 per MMBtu rate at which the first 5 mmscmd are sold at Brent crude oil benchmark. Brent crude oil is presently in the range of USD 50 to 51 per barrel.
Pricing of gas at JKM will be the first time that domestically produced gas is being sold at rates linked to an international gas benchmark, industry sources said.
Also, this will be the first discovery of gas price since the October 2020 decision of the government setting out uniform e-bidding norms for finding the market price.
In that bidding, Reliance-BP had asked gas users to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required. A floor or minimum quote of 8.4 per cent of dated Brent price was set, which meant that bidders had to quote 8.4 per cent or a higher percentage for securing gas supplies.
Reliance got USD 4.205 per mmBtu for gas from D1 and D3 and MA fields during April 2019 and March 2014. It would have got double of that rate if a new formula proposed by the Rangarajan committee was approved but the new BJP government scrapped it and brought a new formula on pricing gas at rates prevalent in export surplus nations such as the US and Russia.
Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 – the largest among the lot – were brought into production from April 2009 and MA, the only oilfield in the block was put to production in September 2008.