Reliance Industries and its partner BP will get just $ 4.06 per unit for the new gas they have started producing in the eastern KG-D6 offshore field, although they have discovered a higher rate in an open market auction, the companies said. sources.
In November 2019, Reliance-BP auctioned initial gas from the R-Series field at a biddable percentage of the price of Brent crude.
If Brent crude stays in the current range of $ 50 to $ 51 a barrel, the price hits $ 4.2 to $ 4.4 per million British thermal unit, two sources from Series R gas buyers said.
Although the operators have freedom of prices, they cannot sell gas at a rate higher than the limit that the government notifies every six months. The limit for six months through March 31, 2021 is $ 4.06 per mmBtu, so Reliance-BP would get just that amount for the rest of the current fiscal, they said.
Essar Steel, Adani Group and state-owned GAIL purchased in November 2019 most of the initial 5 million standard cubic meters per day of gas that is planned to be produced from the R Series in the KG-D6 block through a tender of between 8.5 and 8.6%. of the dated Brent price.
Emails sent to Reliance and BP seeking comment went unanswered.
The rate discovered in the November 2019 auction at the lower end of the Brent price band is the same as that obtained by Reliance in the first five years of production from the Dhirubhai-1 and 3 and MA fields in the KG-D6 block . These fields stopped producing a few months ago.
Reliance obtained USD 4,205 per mmBtu for gas from the D1 and D3 and MA fields during April 2019 and March 2014. It would have obtained twice that rate if a new formula proposed by the Rangarajan committee were approved, but the new government The BJP ruled it out and brought a new formula to set the price of gas at the rates prevailing in countries with export surpluses such as the United States and Russia.
Rates reached USD 5.05 in 2014 and are currently at USD 1.79 per mmBtu.
Sources said that in 2016 the government allowed a higher price to be produced for any new gas from a difficult project like the deepwater field. The R-Cluster field was included in this definition and the gas obtained from it could be freely sold, but subject to the maximum price.
The price cap for the period from October 2020 to March 2021 is USD 4.06 per mmBtu, down from USD 5.61 in the previous six months.
Reliance and BP had stated on November 18 that they had started natural gas production from the deepest gas project in Asia, the R-Cluster or R-Series.
The two companies are investing USD 5 billion to put into production three deepwater gas projects in the KG D6 R-Cluster block, Satellites Cluster and MJ, which together are expected to satisfy around 15 percent of demand for gas from India by 2023.
R-Cluster will have a maximum output of 12.9 mmscmd, while the satellites, which are supposed to start producing from the third quarter of calendar year 2021, will produce a maximum of 7 mmscmd. The MJ field will begin production in the third quarter of 2022 and will have a maximum production of 12 mmscmd.
Sources said that Reliance had auctioned the first 5 mmscmd of gas from the newest discoveries in the KG-D6 block in November 2019 by asking bidders to quote a price (expressed as a percentage of the dated Brent crude rate), the supply period and volume. of gas required.
A minimum or minimum listing of 8.4 percent of the dated Brent price was set, which meant that bidders had to list 8.4 percent or higher to secure gas supply.
Dated Brent means the average of Brent’s published prices during the three calendar months immediately preceding the relevant contract month in which the gas supplies are made.
Essar Steel earned 2.25 mmscmd in the country’s first transparent and dynamic forward auction that lasted about five and a half hours on November 15, 2019, the sources said.
Gujarat State Petroleum Corp (GSPC) bought 1.2 mmscmd, while Adani Group and Mahanagar Gas Ltd bought 0.3 mmscmd, the sources said, adding that GAIL, acting on behalf of the fertilizer 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), the sources said.
In total, 15 clients from sectors such as steel, petrochemicals, urban gas, glass and ceramics obtained gas in the tender, they added.
So far, Reliance has made 19 gas discoveries on the KG-D6 block. Of these, D-1 and D-3, the largest in the batch, entered production in April 2009 and MA, the only oil field in the block, went into production in September 2008.
While the MA field stopped producing last year, production of D-1 and D-3 ceased in February.
Other discoveries have been released or removed by the government for failing to meet deadlines to start production. Reliance is the operator of the block with a 66.6 percent stake, while BP has the remaining stake.
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