Intense bidding takes place for KG-D6 gas

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

Reliance Industries Ltd and its partner BP Plc of the UK, who are bringing a second set of gas discoveries in their Bay of Bengal KG-D6 block, had offered 5.5 million standard cubic meters per day of additional gas in the auction for a flexible tenure of between three to 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 3.2 million standard cubic feet per day (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 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 meters 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, 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 lowest bid that could be placed was JKM minus $0.3 per million British thermal unit. The highest acceptable bid would be JKM plus $2.01 per mm Btu. The bidding, they said, started with a $0.45 discount to JKM price and intense competition led to the discovery of a price of JKM minus $0.6 per mmBtu (discount of $0.6 to ruling JKM price). 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.