Millennium Post

Reliance-BP to auction more gas from KG-D6 block this month

New Delhi: Reliance Industries and its partner BP plc of UK will this month offer for sale more natural gas from its KG-D6 block to users as it prepares to put into production second wave of discoveries in the eastern offshore block.

Reliance-BP is likely to offer as much as 5 million standard cubic meters per day (mmscmd) of natural gas for bidding from newer discoveries in KG-D6 in next few days, sources aware of the development said.

The volume to be offered is the same as the one the company bid out in November last year.

E-mails sent to Reliance and BP for comments remained unanswered.

Like in the previous auction, Reliance-BP will seek bids from potential users for the 5 mmsmcd of natural gas it plans to produce from the R-Cluster Field in KG-D6 block from mid-2020.

Bidders will have to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required. Dated Brent means the average of published Brent prices for three calendar months immediately preceding the relevant contract month in which gas supplies are made.

Sources said Reliance had in November set a floor or minimum quote of 8.4 per cent of dated Brent price — which meant that bidders had to quote 8.4 per cent or a higher percentage for seeking gas supplies. The same formula is likely to be continued in the next auction. In the first round of auction in November 2019, Essar Steel, Adani Group and state-owned GAIL bought a majority of volumes on offer at a price of $5.1-5.16 per unit.

Essar Steel had picked up 2.25 mmscmd in the country's first transparent and dynamic forward auction that lasted about five-and-half-hours on November 15, 2019, sources said.

Gujarat State Petroleum Corp (GSPC) picked up 1.2 mmscmd while Adani Group and Mahanagar Gas Ltd bought 0.3 mmscmd, sources said, adding GAIL, acting on behalf of fertiliser companies, bought 0.3 mmscmd of gas.

Hindustan Petroleum Corp Ltd (HPCL) had bought 0.35 mmscmd and 0.10 mmscmd went to Gujarat State Fertilizers & Chemicals Ltd (GSFC)/Gujarat Narmada Valley Fertilizers & Chemicals Ltd (GNFC), sources said. In all, 15 customers across sectors such as steel, petrochemicals, city gas, glass and ceramic got gas in the tender, they added.

In the November 15 auction, bidders quoted between 8.5 and 8.6 per cent slope to corner all of the 5 mmscmd supplies available. This translates into a price between $5.1 per mmBtu and $5.16 per mmBtu rate at Brent oil price of $60 per barrel. Initially, Reliance had set a floor quote of 9 per cent of dated Brent price, which translated into a gas price of $5.4 per mmBtu at $60 oil price. But consumers saw this as a very high price considering that imported LNG in the spot market is available at around $4 per mmBtu rate currently.

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