RIL-BP set to auction natural gas from KG fields

31 Oct 2023 , 01:29 PM

Reliance Industries and BP’s venture is auctioning natural gas from its KG fields at a crude-linked floor price that, at the current rate, surpasses the government-set cap. This would ensure that the auction winners pay the ceiling price for gas.

According to the bidding document, the consortium has proposed to sell 4 million metric standard cubic metres per day (mmscmd) of natural gas in an e-auction scheduled for November 21. The supplies would be available beginning December 1.

The auction petrol price will be established by a formula that includes a premium above 12.67% of the Dated Brent. Bidders must specify the premium, which must range between $1.08 and $4.5 per mmbtu. With the current crude price of $90 per barrel, the auction’s floor and ceiling prices would be $12.4 and $15.9 per mmbtu, respectively.

The floor price of $12.4 per mmbtu is higher than the government-set ceiling price of $9.96, which applies to all natural gas produced from deep-sea fields such as RIL-BP’s KG block. The government reviews the deep sea gas ceiling price every six months, and the present price is valid until March 2024.

Natural gas prices have been extremely high in global markets over the last two years, increasing realization for local producers such as Reliance, BP, and ONGC. For the last year, domestic deep-sea gas has frequently sold at the government-set ceiling since imported gas is significantly more expensive. The North Asian benchmark for spot liquefied natural gas, the Japan-Korea Marker, is now approximately $18 per mmbtu.

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