Billionaire Mukesh Ambani’s Reliance Industries has picked up two-thirds of its own new gas from KG-D6 block that was auctioned below new guidelines with state-owned GAIL and Royal Dutch Shell getting smaller volumes, sources stated.
Reliance and its associate UK’s BP Plc on Friday auctioned 7.5 million normal cubic metres per day of incremental gas from the R-series gas area within the KG-D6 block, benchmarking it to a gas marker for the very first time within the nation.
The public sale was held below the liberalised value discovery guidelines notified by the federal government that allowed associates of the gas producer to bid and purchase pure gas.
Reliance O2C, an affiliate of Reliance, picked up 4.8 mmscmd of gas in Friday”s public sale that lasted for seven-and-a-half-hours, sources with direct data of the event stated.
State gas utility GAIL (India) Ltd gained 0.85 mmscmd of provides whereas Shell picked up 0.7 mmscmd. Adani Total Gas Ltd received 0.1 mmscmd, Hindustan Petroleum Corporation Ltd (HPCL) 0.2 mmscmd and Torrest Gas 0.02 mmscmd.
Other buyers embody IRM Energy (0.1 mmscmd), PIL (0.35 mmscmd) and IGS (0.35 mmscmd), they stated.
Sources stated the gas was purchased at a value of USD 0.18 per million British thermal unit low cost to JKM i.e. value of JKM (minus) USD 0.18 with tenures ranging from 3 to five years.
Reliance didn’t reply to electronic mail despatched for feedback. Reliance O2C is the brand new unit that holds the agency’s refinery and petrochemical property.
E-bidding course of was performed by an internet web-based digital bidding platform by CRISIL Risk and Infrastructure Solutions Limited (CRIS), an unbiased company empanelled by Directorate General of Hydrocarbons (DGH). CRIS partnered with e-Procurement Technologies Limited (EPTL) and developed e-bidding platform.
The bidding course of was carried out as per the rules notified by the federal government in October 2020.
Sources stated the bidding course of on the market of gas was launched on December 30, 2020 and it witnessed participation from round 15 bidders from metropolis gas distribution sector, metal, energy, refineries, petrochemicals, resellers and other industries.
The e-bidding course of required bidders to submit their value bids linked to worldwide LNG value benchmark JKM (Japan Korea Marker). The JKM represents value for spot LNG delivered in Asian market and is now being broadly utilized in LNG trade as a marker for in medium/ long run LNG contracts as an alternative of conventional linkage to grease.
This was second time Reliance-BP performed an e-bidding course of which ran on a dynamic ahead public sale foundation on the market of KG-D6 gas. Earlier in November 2019, 5 mmscmd of pure gas was bought at value in vary of round 8.6 per cent of Brent crude oil for tenure ranging from 2 to six years.
Reliance-BP began manufacturing of gas on December 18 final yr from the R Cluster ultra-deep-water gas area in block KG D6 off the east coast of India.
The duo creating three deep-water gas tasks in block KG-D6 — R Cluster, Satellites Cluster and MJ — which collectively are anticipated to fulfill round 15 per cent of India’s gas demand by 2023.
R Cluster is the primary of the three tasks to come back onstream and is the deepest offshore gas area in Asia.
E-bidding public sale guidelines requested bidders 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 bidding discover stated.
GCV stands for gross calorific worth.
”V” generally is a optimistic, zero or damaging quantity and as much as two decimal locations nevertheless it can’t be lower than (-)0.30 USD/MMBtu, it stated.
This means customers should quote -0.30 or greater worth of ”V”.
If JKM averaged USD 6 per MMBtu, the worth will probably be USD 5.82 per MMBtu.
But Reliance-BP will solely get the federal government notified cap value for gas from deep-sea fields.
Pricing of gas at JKM would be the first time that domestically produced gas is being bought at charges linked to a world gas benchmark, trade sources stated.
Also, this would be the first discovery of gas value for the reason that October 2020 choice of the federal government setting out uniform e-bidding norms for locating the market value.
That Cabinet choice additionally allowed the sale of gas to ”associates” and so whereas Reliance-BP affiliate corporations couldn”t take part within the November 2019 value discovery, they did in e-bidding on February 5.
The authorities has given operators the liberty to find market costs however this charge is topic to a pricing ceiling or cap that the federal government notifies each six months. The cap for six months to March 31, 2021, is USD 4.06 per mmBtu.
And accordingly, Reliance-BP would get solely that quantity for the gas.
Essar Steel, Adani Group and state-owned GAIL in November 2019 purchased the bulk of the preliminary 5 mmscmd of gas deliberate to be produced from R-Series within the KG-D6 block by bidding between 8.5 and eight.6 per cent of dated Brent value.
In that bidding, Reliance-BP had requested gas customers to cite a value (expressed as a share of the dated Brent crude oil charge), provide interval and the quantity of gas required.
A flooring or minimal quote of 8.4 per cent of dated Brent value was set, which meant that bidders needed to quote 8.4 per cent or the next share for securing gas provides.
Dated Brent means the common of revealed Brent costs for 3 calendar months instantly previous the related contract month through which gas provides are made.
Reliance received USD 4.205 per MMBtu for gas from D1 and D3 and MA fields throughout April 2019 and March 2014. It would have gotten double of that charge if a brand new formulation proposed by the Rangarajan committee was authorized however the brand new BJP authorities scrapped it and introduced a brand new formulation on pricing gas at charges prevalent in export surplus nations such because the US and Russia.
The charges got here to USD 5.05 in 2014 and are presently at USD 1.79 per mmBtu.
Reliance-BP is investing USD 5 billion in bringing to manufacturing three deepwater gas tasks in block KG-D6 R-Cluster, Satellites Cluster, and MJ which collectively are anticipated to fulfill about 15 per cent of India”s gas demand by 2023.
R-Cluster may have a peak output of 12.9 mmscmd whereas satellites, that are supposed to start output from the third quarter of the 2021 calendar yr, would produce a most of 7 mmscmd. MJ area will begin manufacturing within the third quarter of 2022 and may have a peak output of 12 mmscmd.
Reliance has up to now made 19 gas discoveries within the KG-D6 block. Of these, D-1 and D-3 — the biggest among the lot — had been introduced into manufacturing from April 2009 and MA, the one oilfield within the block was put to manufacturing in September 2008.
While the MA area stopped producing final yr, output from D-1 and D-3 ceased in February.
Other discoveries have both been surrendered or taken away by the federal government for not assembly timelines for starting manufacturing. Reliance is the operator of the block with 66.6 per cent curiosity whereas BP holds the remaining stake.