RIL out­bids GSPC, oth­ers to buy all its own CBM gas

Resource Digest - - CONTENT -

Reliance In­dus­tries has out­bid all its ri­vals, in­clud­ing sta­te­owned GAIL In­dia, to buy the en­tire vol­ume of nat­u­ral gas from its own coal seam blocks un­til March 2021. In May RIL had be­come the first buyer of gas it pro­duced from its own coal bed meth­ane (CBM) block in Mad­hya Pradesh af­ter agree­ing to pay the high­est price of $ 4.23 per mil­lion Bri­tish ther­mal unit (mmbtu) for May-june. In the fol­low­ing quar­ter, it paid an ad­di­tional 6 per cent at $4.50 per mmbtu to take all of the CBM gas from the So­hag­pur East and So­hag­pur West blocks. In the lat­est bidding for up to 3 mil­lion standard cu­bic me­tres per day (mm­scmd) of gas to be pro­duced be­tween Oc­to­ber 2017 and March 2021, RIL quoted $6.26 per mmbtu at the cur­rent oil price, ac­cord­ing to bid doc­u­ments.

Pi­ra­mal Glass was the sec­ond-high­est bid­der quot­ing $4.97 per mmbtu, fol­lowed by Gu­jarat State Petroleum Cor­po­ra­tion (GPSC) putting in a bid of $4.9. GAIL bid for 1.5 mm­scmd of gas at a price of $4.63 per mmbtu while its sub­sidiary GAIL Gas sought an equiv­a­lent quan­tity at $4.11 per mmbtu price, the bid doc­u­ment showed. RIL plans to use the gas at its petro­chem­i­cal plants in Gu­jarat and Ma­ha­rash­tra, which run mostly on ex­pen­sive im­ported fuel.

Out­put would be ramped up to 2 mm­scmd by March 2018 while the peak pro­duc­tion of 3 mm­scmd would be touched in the third quar­ter of 2018. The rate of CBM gas is 150 per cent more than the gov­ern­ment man­dated $2.48 per mmbtu price of the con­ven­tional nat­u­ral gas pro­duced by firms such as ONGC and RIL from the east­ern off­shore KG-D6 block.

The bidding for­mula in all the three bid rounds for CBM gas this year has been the same and the process has been con­ducted by Crisil Risk and In­fra­struc­ture So­lu­tions, a unit of Crisil. This for­mula is al­most sim­i­lar to the one RIL had run in 2012 to dis­cover a price for CBM gas. Back in 2012, it had sought bids for 3.5 mm­scmd of coal gas at the bench­marked rate of 12.67 per cent of JCC, or Ja­pan Cus­toms-cleared Crude, plus $0.26 per mmbtu.

The for­mula was the same at which Petronet LNG, a joint ven­ture of public oil com­pa­nies, whose chair­man is the oil sec­re­tary, used to buy long-term liq­ue­fied nat­u­ral gas (LNG) from Qatar. At $100 per bar­rel oil price preva­lent that year, CBM from RIL'S Mad­hya Pradesh block was to cost $12.93 per mmbtu. At $58 a bar­rel rate cur­rently, it would have cost $7.3.

That for­mula was, how­ever, re­jected by the min­istry even though 59 valid bids seek­ing about 70 mm­scmd of gas were re­ceived in the open ten­der. In the cur­rent price dis­cov­ery, RIL sought bids in the form of a de­ductible from 12.67 per cent of pre­vail­ing Brent crude oil price plus $0.52 per mmbtu plus $0.26 per mmbtu, ac­cord­ing to the bid doc­u­ment.

RIL’S bid de­ducted $1.836 per mmbtu and Pi­ra­mal Glass $3.156. GAIL quoted a de­duc­tion of $3.495. RIL has in­vested about $ 500 mil­lion in CBM and in lay­ing a 300-km pipe­line from So­hag­pur to Phulpur in Ut­tar Pradesh to con­nect it to the na­tional gas grid.

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