14 bidders slug it out for KG-D6 gas supply

Interest shows a better demand scenario for gas

New Delhi, May 13: As many as 14 users across sectors slugged it on a third-party electronic platform for seven-andhalf hours to secure natural gas supplies from the eastern offshore KG-D6 block before the oil-tochemical (O2C) unit of Reliance Industries Ltd bagged most of the supplies, sources said.

Reliance Industries Ltd and its partner BP Plc of the United Kingdom, who are bringing a second set of gas discoveries in their Bay of Bengal KG-D6 block, had offered 5.5 million standard cubic metres per day (mmscmd) of additional gas in the auction for a flexible tenure of between three and five years.

Gas users companies like Indian Oil Corporation (IOC), Reliance O2C, GAIL Gas, Adani Total Gas Ltd, Torrent Gas, Torrent Power and gas trading companies like GAIL, Shell and IGS were locked in the intense bidding war on the e-auction that happened on May 5, sources in the Reliance-BP consortium said.

At the end of the intense bidding war, Reliance O2C walked away with three mmscmd of supplies, offering better prices than competitors, they said.

India Gas Solutions (IGS) - a gas sourcing and marketing joint venture of Reliance and BP - bagged another 1 mmscmd, while IOC got a similar volume.

The remaining volume was picked by Adani Gas

(0.15 mmscmd), IRM Energy (0.10 mmscmd), GAIL (30,000 cubic meters per day) and Torrent Gas (20,000 cubic metres per day). This is the third auction

that Reliance-BP conducted on a third party independent platform approved by the Directorate General of Hydrocarbons (DGH). The online web-based electronic bidding platform of CRISIL Risk and Infrastructure Solutions Ltd (CRIS) was also used for e-auction in February this year as well as in 2019.

In the three auctions, Reliance-BP has sold around 18 mmscmd of domestic gas from new fields in the KG-D6 block, which would help substantially reduce reliance on imported LNG, the sources said.

In the May 5 auction, Reliance-BP had asked bidders to quote a price linked to Platts JKM (Japan Korea marker), the liquefied natural gas (LNG) benchmark price assessment for spot physical cargoes.

The intense competition indicates a preference for domestic gas vis a vis LNG for Indian consumers.

At current prices, the discovered price translates into a price of about $9 per mmBtu, but the buyers will be required to pay only the cap or ceiling price that the government has set for such fields.

The government sets a cap or ceiling rate at which natural gas from difficult fields like deepsea can be sold.

This cap for the period April 1, 2021, to September 30 2021 is $3.62 per mmBtu.

With the return of demand, international rates have rebounded, which will reflect in the prices in the second revision due on October 1.