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Reliance-BP alters gas price terms

Gas from R-Series field to start production from February
Reliance-BP had in November 2019 sold the first 5 million standard cubic meters per day (mscmd) of gas from the R-Series field in the KG-D6 block.

Our Special Correspondent   |   New Delhi   |   Published 31.12.20, 02:35 AM

The consortium of Reliance Industries and BP on Wednesday invited bids for gas it plans to produce from the second-wave discoveries in the KG-D6 block, pricing them for the very first time against JKM or Japan/Korea Liquefied Natural Gas Import Price, an international gas benchmark.

“The gas produced for KG-D6 will be available for sale at the delivery point at Gadimoga near Kakinada, Andhra Pradesh tentatively from 01 February 2021,” the companies said in a notice. The e-bidding would take place on January 22, the request for proposal said. 

Reliance-BP had in November 2019 sold the first 5 million standard cubic meters per day (mscmd) of gas from the R-Series field in the KG-D6 block. The duo has now invited bids for 7.5 mscmd of incremental output that is likely to be available from February next year, according to a notice inviting offer.

They had priced the first 5mscmd  against Brent crude oil and now they are seeking rates equivalent to JKM or Japan/Korea Liquefied Natural Gas Import Price. Bidders have been asked to ”quote the variable denoted as ‘V’ in USD per million British thermal unit (mBtu) terms”.

“The gas price (in $/mBtu (GCV)) shall be = JKM + V,” the notice said. GCV stands for gross calorific value. “V” can be a positive, zero or negative number and up to two decimal places but it cannot be less than (-) 0.30 $/mBtu, it said. This means users will have to quote (-) 0.30 or higher value of “V”.

JKM averaged $6.20 per mBtu in November and at the base or cut off price, KG-D6 gas would cost $5.9 per mBtu. 

This is higher than $4.2-4.4 per mBtu rate at which the first 5mscmd were sold at Brent crude oil benchmark. Brent crude oil is presently in the range of $50-51 per barrel.

This will be the first discovery of gas price since the October 2020 decision of the government setting out uniform e-bidding norms for finding the market price. 

The Cabinet decision in October allowed the sale of gas to “affiliates”, meaning Reliance-BP affiliate companies can now take part in the bidding.

Earlier this month, RIL and its partner BP had announced the commencement of natural gas production from the second wave of discoveries in the KG-D6 fields.

Asia's deepest project, putting the second wave of discoveries in the KG-D6 block onstream.

The production from ultra-deepwater R-Cluster, the first of the three deepsea projects Reliance-BP are developing in the eastern offshore block, started production, the two firms said. Reliance and BP are developing three deepwater gas projects in block KG D6 – R Cluster, Satellites Cluster and MJ – which together are expected to meet about 15% of India's gas demand by 2023. "These projects will utilise the existing hub infrastructure in KG-D6 block," it said.

Reliance is the operator of KG D6 with a 66.67% participating interest and BP holds a 33.33% stake. R-Cluster is the first of the three projects to come onstream. The field is located about 60 kilometres from the existing KG-D6 Control and Riser Platform (CRP) off the Kakinada coast and comprises a subsea production system tied back to CRP via a subsea pipeline.

Located at a water depth of greater than 2,000 metres, it is the deepest offshore gas field in Asia. The field is expected to reach plateau gas production of about 12.9 million standard cubic metres per day (mmscmd) in 2021.

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