The biggest oil company in the country, Indian Oil Corporation (IOC), has walked away with half of the natural gas that Reliance Industries Ltd. and its partner, bp of the UK, provided in the most recent auction of the fuel needed to create CNG, generate electricity, and fertiliser.
From the 5 mmscmd of gas that was auctioned off last month, IOC received 2.5 million standard cubic metres per day, according to individuals with knowledge of the situation.
The volume bids were made on behalf of seven fertiliser factories by the oil refining and marketing business, which had previously won the highest offer in the auction for gas from Reliance-bp’s KG-D6 offshore block in the east.
A total of 0.5 mmscmd of city gas, secured by firms including GAIL Gas Ltd, Mahanagar Gas Ltd, Torrent Gas, Indian Oil Adani Gas Ltd and Haryana City Gas, would be converted into CNG for sale to vehicles and piped into homes’ kitchens for cooking.
According to them, Gujarat State Petroleum Corp (GSPC) and refiner Hindustan Petroleum Corporation Ltd (HPCL) each received 0.6 mmscmd, while Shell received an additional 0.2 mmscmd.
Reliance-BP is currently ramping up supply after two years ago reversing the downward trend in domestic gas output by bringing to production their second wave of discoveries in the KG-D6 block located in the deep waters of the Bay of Bengal.
Natural gas is seen as a transition fuel for countries moving from polluting hydrocarbons to zero-emission fuels since it burns cleanly and efficiently.
In the most recent tender, Reliance-BP provided 5 mmscmd of gas for a three-year term beginning on June 1. The JKM price, the spot market benchmark for liquefied natural gas (LNG) transported to Japan and South Korea, was the only price that was required of bidders.
The e-auction, according to sources, began on May 19 and finished on May 23. This was its longest period since operators were permitted to sell petroleum via open tender.
They said that petrol was sold to 16 bidders at the conclusion of the e-auction for a price of JKM + (plus) USD 0.75 per mmBtu for three years, adding that at the current JKM price of USD 9.2 per mmBtu, the cost of KG-D6 petrol is close to USD 10.
This price is compared to the capped price of USD 6.5 per mmBtu set by the state-owned giant Oil and Natural Gas Corporation (ONGC) for gas used to create fuel from legacy or ancient fields.
Petrol sold by Reliance-BP in April totaled 6 mmscmd. IOC left with about half of the 6 mmscmd of gas that was sold in an online auction on April 12; GAIL purchased 0.7 mmscmd, Adani-Total Gas Ltd. purchased 0.4 mmscmd, Shell purchased 0.5 mmscmd, GSPC purchased 0.25 mmscmd, and IGS purchased an additional 0.5 mmscmd.
According to reports, the final bid price in that auction also included a premium of USD 0.75 per mmBtu above the JKM price (JKM + USD 0.75 per mmBtu).
However, the bidders will only be required to pay the cap price, which the government sets every two years, for gas produced in challenging environments, such as deepwater and high-temperature, high-pressure (HTHP) environments.
The maximum price per mmBtu from April to September is USD 12.12.
Gas extracted from wells dug below the seabed is used in businesses, to power vehicles, to create fertiliser, to power homes’ kitchens, to make CNG and to generate energy.
Reliance-BP auctioned 5.5 mmscmd of additional gas from the more recent finds in the KG-D6 block in May of last year, comparing it to the same JKM gas marker.
The price found in the electronic auction was USD 0.06 less expensive than the JKM (Japan-Korea Marker) LNG price.
Prior to that, the team had offered JKM a discount of $0.18 per mmBtu on 7.5 mmscmd of petrol.
19 gas discoveries have been discovered by Reliance so far in the KG-D6 block. The two biggest of these, D-1 and D-3, were placed into production in April 2009, while MA, the block’s only oilfield, was put into production in September 2008.
While production from the MA field terminated in September 2018, it did so for D-1 and D-3 in February 2020.
Since then, Reliance-BP has committed USD 5 billion to developing the R-Cluster, Satellites Cluster, and MJ deepwater gas projects in block KG-D6, which when combined are anticipated to provide 15% of India’s gas needs by 2023.