Reliance re-auctions gas in line with new govt rules

New Delhi: Reliance Industries Ltd and its partner bp plc have re-launched an auction for sale of natural gas from their eastern offshore KG-D6 block after incorporating the government’s new marketing rules to give CNG-selling city gas companies first priority over supplies.

Reliance and its partner BP Exploration (Alpha) Ltd (BPEAL) will sell 6 million standard cubic meters per day of gas in an e-auction planned for April 3, a tender notice said. The price is indexed to the global LNG marker,

JKM but will be subject to the government-notified ceiling price.

The partners had originally planned the auction in January but days before that the Ministry of Petroleum and Natural Gas, on January 13, published new rules for the sale and resale of gas produced from discoveries in deep sea, ultra-deep water and high-pressure-high temperature areas.

This led to the auction being suspended and is now being re-launched after incorporating changes.

Gas produced from wells drilled below seabed is used to produce electricity, make fertiliser or turned into CNG for powering automobiles or piped to household kitchens for cooking as well as in industries.

The new government rules require bidders to state upfront if they were purchasing the gas through the auction for ‘own use as end consumers (including for use of their group entities) or as a trader.

While end consumers were allowed to resale any unconsumed gas, traders participating in the auction were allowed to resell subject to a maximum trading margin of Rs 200 per thousand cubic meters.

“In any situation, which may require proportionate distribution of the gas offered under the bidding process, the contractor (company selling the gas) shall offer gas to bidders belonging to CNG (transport)/PNG (domestic) sector, fertilizer, LPG and power sector in that order,” the ministry had said, adding any leftover gas shall be offered to other bidders.

Besides incorporating the changes in their tender, Reliance and bp have increased the duration of supply contract to 5 years instead of 3 years offering the January auction.

Supplies are to start from April 16, the tender said.

City gas distributors selling CNG for the transport sector and piped natural gas to households kitchens will get top priority in allocation of gas in case of tie for any bids, followed by fertilizer, power plants and end consumers/traders in that order, it said.

In the January auction, the gas was intended for sale to end consumers who were not permitted to resale 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 meter per day), or a third of the volumes being produced at KG-D6, starting April 16, 2023, according to the tender document.