Reliance postpones gas auction after changes in marketing rules – Times of India

New Delhi: Reliance The industry and its partner BP Plc on Monday suspended planned auctions to sell natural gas from its eastern offshore KG-D6 block after the government changed marketing rules to limit margins.
In a notice, Reliance and its partner BP Exploration (Alpha) Ltd (BPEAL) said the auction has been suspended indefinitely.
The e-bidding for the sale of 6 million standard cubic meters per day of gas was originally scheduled for January 18 but was later postponed to January 19 and then to January 24.
on 13 January Ministry of Petroleum and Natural Gas published new rules for sale and resale of gas produced from discoveries in deep sea, ultra-deep water and high pressure-high temperature areas with marketing and pricing freedom.
For this, bidders had to indicate in advance whether they were buying gas through auction, ‘for their own use as end consumers (for use by their group entities) or as a trader.
While end consumers were allowed to resell any unutilized gas, traders participating in the auction were allowed to resell subject to a maximum trading margin of Rs 200 per thousand cubic metres.
“In any event, which may require proportionate distribution of the gas offered under the bidding process, the Contractor (Gas Selling Company) shall distribute the gas to the bidders belonging to CNG (Transport)/PNG (Domestic) sector, Fertilizer, LPG and Electricity. sector in that order,” the ministry said, adding that any leftover gas would be offered to other bidders.
The auction that Reliance-BP launched on December 29, 2022, intended to sell the gas to end consumers, who were not allowed to resell any unconsumed gas.
Also, there was no clarity on the participation of traders.
“It is hereby notified that the current bidding process is suspended till further notice,” the two firms said in a notice on Monday.
It did not give the reason for the suspension but industry sources said the suspension is linked to the new rules brought in by the government.
As per the tender document, both the partners invited bids for the sale of 6 mmscmd or one-third of the quantity to be produced at KG-D6 from February 2023.
Users such as city gas operators who convert the gas to CNG for sale to automobiles and pipe it to domestic kitchens for cooking purposes, or power plants who use it to generate electricity, or fertilizer units Those who use it to make urea were asked to quote the premium they are willing to pay over the JKM price.
The Northeast Asian Spot Price Index for JKM is LNG Pre-shipped to Japan and Korea. The JKM price for March is around US$21 per million British thermal unit.
Bidders were asked to quote the variable ‘V’ in the gas price formula ‘JKM + V’.
The opening bid for ‘V’ was initially set at $(minus) 0.30 per mmBtu, but was later changed to $(minus) 0.42.
The tender document stated that each bidder was required to submit a bid greater than or equal to the opening bid.
The maximum valid bid for ‘V’ was initially kept at $5.01 per MMBtu, but later it was changed to $2.01, after which the bid will not be accepted by the e-bidding portal.
For gas produced from deep sea fields, the gas price should have been higher than the ceiling price fixed by the government or the price arrived at in the bid.
In May last year, Reliance-BP auctioned 5.5 mmscmd of incremental gas from new discoveries in the KG-D6 block, benchmarking it to the same JKM gas marker.
Three-fourth of that volume was raised by Reliance and its affiliates.
The discovered price in that e-auction came at a $0.06 discount to the JKM (Japan-Korea Marker) LNG price.
Earlier, both had sold 7.5 mmscmd of gas to JKM at a discount of $0.18 per mmBtu.
The government sets a cap or ceiling rate at which natural gas from difficult areas such as the deep sea can be sold. The cap is $12.46 per mmBtu for the period from October 1, 2022 to March 31, 2023.
Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 – the largest in the lot – were brought into production in April 2009, and MA, the only oil field in the block, was brought into production in September 2008.
While the MA field ceased production in September 2018, production from D-1 and D-3 ceased in February 2020.
Since then, Reliance-BP has been investing $5 billion to bring into production three deepwater gas projects in block KG-D6 – R-Cluster, Satellite Cluster, and MJ – which together produce about 15 per cent of India’s gas. is expected to complete. demand till 2023