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ONGC asks a higher price of $15 mmBtu for natural gas from KG Field

Higher reserve price of $15 mmBtu set in the new tender for selling gas

August 25, 2022 8:41 IST | India Infoline News Service

To take advantage of the global rise in energy prices, the Oil and Natural Gas Corporation (ONGC) has reopened a tender to sell gas from its KG fields at a higher price of USD 15 per mmBtu.


The company requested offers for the sale of 0.75 million standard cubic meters of gas per day for a period of one year from the KG-DWN-98/2 (KG-D5) fields in the Bay of Bengal, citing the tender document. Users were prompted by the company to provide a premium quote that is greater than the reserve gas price, which is 1 dollar per million British thermal units plus 14% of the price of Brent crude oil.


The reserve price equates to more than USD 15 per mmBtu at the current benchmark Brent oil price of USD 101 per barrel. The government-mandated ceiling rate for gas produced from deep-ocean fields or the appropriate sale price must be lower, it stated.


The price of domestically produced natural gas is set by the government twice a year; for the six-month period starting on April 1, the pricing for gas from deep-sea fields is set at USD 9.92 per mmBtu. In October, this rate is anticipated to be increased to reflect a rise in global energy prices as a result of Russia's invasion of Ukraine.


A court challenge forced ONGC to abandon the sale of 2 mmscmd of gas from the KG-D5 block, which it had sought bids for in April of last year.


That tender was for the sale of 2 mmscmd of gas at Odalarevu in Andhra Pradesh's East Godavari district for a period of 3 to 5 years. Odalarevu is connected to the KG basin pipeline network of the state gas utility GAIL as well as the East-West Pipeline of PIL, which is connected to the KG basin network and ultimately to the Gujarat gas grid.


Bidders in that tender had to offer a premium greater than 10.5% of Brent. Peak production rates of 15.25 mmscmd of natural gas and 80,000 barrels per day of oil are anticipated for ONGC's KG-D5 block. For the sale of 5 mmscmd of gas starting in 2019, the business is anticipated to release another tender later this year.


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