Business & Investment

RIL buys two-thirds of its gas from KG-D6

Reliance Industries has picked up two-thirds of its new gas from the KG-D6 block auctioned under the new rules that the State Gas Corporation (GAIL) and Royal Dutch Shell will acquire small quantities, sources said. Told.

Reliance and its partner, BP Plc in the United Kingdom, auctioned 7.5 million standard cubic meters of incremental gas per day from the R-series gas field of the KG-D6 block on Friday for the first time in the country to benchmark gas markers.

The auction was held under liberalized price discovery rules notified by the government that allowed gas producers’ affiliates to bid and buy natural gas.

Reliance O2C, an affiliate of Reliance, picked up 4.8 mmscmd gas at an auction on Friday and lasted seven and a half hours, sources directly aware of the development said.

The state gas company GAIL (India) Ltd has acquired a supply of 0.85 mmscmd and Shell has acquired 0.7 mmscmd. Adani Total Gas Ltd got 0.1 mmscmd, Hindustan Petroleum Corporation Ltd (HPCL) got 0.2 mmscmd, and Torrest Gas got 0.02 mmscmd.

Other buyers include IRM Energy (0.1 mmscmd), PIL (0.35 mmscmd) and IGS (0.35 mmscmd), they said.

Gas was purchased at a price of $ 0.18 per British thermal unit discount of $ 1 million to JKM, sources said. That is, the JKM (minus) price is US $ 0.18 and the holding period is 3 to 5 years.

Reliance O2C is a new unit that owns the company’s refineries and petrochemical assets.

The electronic bidding process was carried out by CRISIL Risk and Infrastructure Solutions Limited (CRIS) through an online web-based electronic bidding platform. CRISIL is an independent body appointed by the Directorate General of Hydrocarbons (DGH). CRIS has partnered with e-Procurement Technologies Limited (EPTL) to develop an e-bidding platform.

The bidding process was carried out in accordance with the guidelines notified by the government in October 2020.

The gas sales bidding process began on December 30, 2020, according to sources, with approximately 15 bidders from the city gas distribution sector, steel, electricity, refineries, petrochemicals, resellers and other industries. Participated.

The electronic bidding process required bidders to submit price bids linked to the International LNG Price Benchmark JKM (Japan-Korea Marker). JKM represents the price of spot LNG supplied in the Asian market and is currently widely used in the LNG industry as a marker for medium- to long-term LNG contracts rather than traditional oil collaboration.

This is the second time Reliance-BP has implemented an electronic bidding process that runs on a dynamic forward auction basis for the sale of KG-D6 gas. At the beginning of November 2019, 5 mm scmd natural gas was sold for a holding period of 2 to 6 years at a price ranging from about 8.6% of Brent crude oil.

Reliance-BP began producing gas on December 18, last year, from the R-cluster ultra-deep sea gas field in block KGD6 off the east coast of India.

The duo, which is developing three deep-sea gas projects (R cluster, satellite cluster, MJ) on Block KG-D6, is expected to meet approximately 15% of India’s gas demand by 2023.

The R-cluster is the first of three projects to go live and is the deepest offshore gas field in Asia.

The rules for electronic bidding auctions required bidders to “quote the variable indicated by the” V “in US dollars in terms of 1 million British thermal units (MMBtu).” “The gas price (USD / MMBtu (GCV)) must be = JKM + V,” the bid notice said.

GCV is an abbreviation for total calorific value.

The “V” is a positive, zero, or negative number with up to two decimal places, but cannot be less than (-) $ 0.30 / MMBtu.

This means that the user must quote a value greater than or equal to -0.30 for “V”.

If the average JKM is $ 6 per MMBtu, the price will be $ 5.82 per MMBtu.

However, Reliance-BP only informs the government of the maximum price of gas from the deep sea field.

According to industry sources, gas pricing at JKM is the first time domestically produced gas is sold at a rate linked to international gas benchmarks.

It will also be the first discovery of gas prices since the government decided in October 2020 to set a unified electronic bidding standard for finding market prices.

Reliance-BP’s affiliates were unable to participate in price discovery in November 2019 because the Cabinet’s decision also allowed the sale of gas to “affiliated companies”, but on February 5th, they bid electronically. I participated.

The government has given operators the freedom to discover market prices, but this fee is subject to the price cap or cap that the government notifies every six months. The 6-month limit until March 31, 2021 is $ 4.06 per mmBtu.

Correspondingly, Reliance-BP gets only that amount for the gas.

In November 2019, Essar Steel, Adani Group, and GAIL bid most of the first 5 mmscmd gas to be produced from the R series of KG-D6 blocks at 8.5-8.6% of the date’s Brent price. I bought it.

In that bid, Reliance-BP asked gas users to estimate the price (expressed as a percentage of the dated Brent crude oil rate), the supply period, and the amount of gas needed.

A minimum or minimum quote of 8.4% of the date’s Brent price has been set. This meant that bidders would need to estimate a percentage of 8.4% or higher to secure gas supply.

Dated Brent means the average published Brent price for the three calendar months immediately preceding the relevant contract month in which the gas is supplied.

Between April 2019 and March 2014, gas confidence from the D1, D3 and MA fields was $ 4.205 per MMBtu. The new method proposed by the Langarajan Commission has been approved, but the new BJP government has abandoned it and a new formula for gas pricing at rates prevalent in export surplus countries such as the United States (US) and Russia. ..

The price was $ 5.05 in 2014 and is now $ 1.79 per 1mm Btu.

Reliance-BP has invested $ 5 billion in the production of three deep-sea gas projects, Block KG-D6 R-Cluster, Satellites Cluster, and MJ, which together bring about about India’s gas demand by 2023. Expected to meet 15%.

The peak output of R-Cluster is 12.9mmscmd, but satellites scheduled to start output in the third quarter of the 2021 calendar will generate up to 7mmscmd. The MJ field will go into production in the third quarter of 2022 and will have a peak output of 12mm scmd.

Trust has so far discovered 19 gases in the KG-D6 block. Of these, the largest lots, D-1 and D-3, began production in April 2009, and MA, the only oil field in the block, began production in September 2008.

The MA field stopped production last year, but the output from the D-1 and D-3 stopped in February.

Other discoveries were abandoned or taken up by the government because they did not meet the timeline to start production. Reliance is the operator of the block with a 66.6% stake, and BP holds the remaining shares.

RIL buys two-thirds of its gas from KG-D6 RIL buys two-thirds of its gas from KG-D6

Back to top button