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Reliance’s Oil Chemistry (O2C) division picked up 3.2mmscmd of gas at the auction, three sources with direct knowledge of the development.
India Gas Solutions (IGS) – a Reliance and BP joint venture for the procurement and marketing of gas – added an additional 1 mmscmd.
The remaining volume was taken up by Adani Gas (0.15 mm³), IRM Energy (0.10 mm³), GAIL (30,000 cubic meters per day) and Torrent Gas (20,000 cubic meters per day).
According to sources, the price found in the e-auction was valued at a discount of USD 0.06 compared to the LNG price by JKM (Japan-Korea Marker).
At current prices, that’s around $ 8 to $ 9 per million British thermal units (mmBtu), but buyers end up paying less than half that rate.
The government sets a cap or rate at which natural gas from difficult fields like deep sea can be sold. This upper limit for the period from April 1, 2021 to September 30, 2021 is USD 3.62 per mmBtu.
“The lower cap means that while buyers are willing to pay higher rates, gas is being sold at a lower rate. The lower rate benefits the buyer and gives the producer a less paid price. More importantly, the government will lose millions of dollars in lower royalties and taxes at lower rates, “said one of the sources.
Emails to Reliance and BP for comments went unanswered.
In last week’s e-auction, Reliance-BP asked bidders to provide a price linked to Platts JKM, the benchmark liquefied natural gas (LNG) price rating for physical spot loads.
The lowest bid that could be placed was JKM minus USD 0.3 per mmBtu. The highest acceptable bid would be JKM plus USD 2.01 per mmBtu.
The auction ended at JKM minus USD 0.06 per mmBtu, sources said.
This is the same benchmark the RIL-BP used in February to sell 7.5mm3 of gas from the block.
In this auction, too, RIL took up two thirds of the 7.5 mm cmd gas sold. Reliance O2C absorbed 4.8 mmscmd of gas while state gas utility GAIL (India) gained 0.85 mmscmd of supplies and Shell 0.7 mmscmd.
Adani Total Gas received 0.1 mmscmd, Hindustan Petroleum Corporation Ltd (HPCL) 0.2 mmscmd, and Torrent Gas 0.02 mmscmd. Other buyers are IRM Energy (0.1 mmscmd), PIL (0.35 mmscmd) and IGS (0.35 mmscmd).
According to sources, the gas up for auction was bought at a price of USD 0.18 per mmBtu discount on JKM, ie at a price of JKM (minus) USD 0.18 with a term of between 3 and 5 years.
Reliance O2C is the new entity that will hold the company’s refining and petrochemical assets.
Last week’s auction marked the third time Reliance-BP had e-bidding on a dynamic forward auction basis for the sale of KG-D6 gas. In November 2019, 5mm natural gas was sold at a price in the range of around 8.6 percent of Brent crude for a term of 2 to 6 years.
Reliance-BP started gas production from the ultra-deep water gas field R Cluster in Block KG D6 off the east coast of India on December 18th last year. Essar Steel, Adani Group and GAIL had purchased most of the gas sold in that auction by bidding between 8.5 and 8.6 percent of the dated Brent price.
Reliance-BP is investing $ 5 billion in the production of three deep water gas projects in Block KG-D6 R-Cluster, Satellites Cluster and MJ, which together are expected to meet around 15 percent of India’s gas needs by 2023.
R-Cluster will have a peak power of 12.9 mmscmd, while satellites that started production a few weeks ago would produce a maximum of 7 mmscmd. MJ field will start production in the third quarter of 2022 and have a peak output of 12 mmscmd.
Reliance has made 19 gas discoveries in the KG-D6 block to date. Of these, D-1 and D-3 – the largest of the lots – went into production in April 2009, and MA, the only oil field in the block, went into operation in September 2008.
While the MA field stopped production last year, production of the D-1 and D-3 was stopped in February.
Other discoveries were either abandoned or taken away by the government because deadlines to start production were not met. Reliance is the operator of the block with a 66.6 percent stake, while BP holds the remaining stake. ANZ ANU ANU
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