Indian Oil Corp corners over third of D6 gas in Reliance auction

NEW DELHI: State-owned Indian Oil Corporation (IOC) has cornered more than a third of natural gas that Reliance Industries Ltd and its partner bp of the UK offered in the latest auction of the KG-D6 gas, sources said.

IOC got 1.45 million standard cubic meters per day out of the 4 mmscmd of gas auctioned last week. The oil refining and marketing company, which was the top bidder even in the previous two auctions of gas from the eastern offshore KG-D6 block of Reliance-bp, bid the volumes as an aggregator on behalf of fertilizer plants.

City gas companies including Torrent Gas and Gujarat Gas secured a total of 2.21 mmscmd of gas for turning into CNG for sale to automobiles and piped to household kitchens for cooking purposes, two sources with direct knowledge of the matter said.

Gujarat Gas won the tender to buy 0.5 mmscmd, Torrent Gas 0.45 mmscmd, Adani Total Gas Ltd 0.29 mmscmd, IndianOil-Adani Gas Pvt Ltd 0.17 mmscmd and Indraprastha Gas Ltd and Mahanagar Gas Ltd 0.30 mmscmd each, they said.

The auction saw participation from across the gas consuming sectors - fertilizer, city gas distribution, refineries and aggregators. A total of 38 successful bidders secured gas through the auction process, which concluded on November 24, they added.

Reliance and bp last week auctioned 4 mmscmd of gas from the Krishna Godavari basin block starting December 1, 2023.

They asked users to quote a price indexed to Brent crude oil price, according to the tender document. This was a departure from the previous two previous auctions, the last being in May this year, where gas was sold indexed to international gas benchmark, JKM.

In the latest auction, Reliance-bp asked bidders to quote a premium ‘v’ they are willing to pay over and above 12.67 per cent of dated Brent crude oil price. The starting bid price for ‘v’ has been kept at $1.08 per million British thermal unit.

Sources said the value of ‘v’ in the auction came to $1.98 per mmBtu.

At the current Brent crude oil price of $80 per barrel, the gas price comes to $12.11 per mmBtu ($10.136 per mmBtu plus ‘v’ of $1.98). But the bidders will have to pay a lesser price as according to the tender document the sale price would be the lower of the government-dictated maximum rate payable for gas from difficult fields like deepsea, and the price arrived through the bidding process.

The ceiling price payable for gas from difficult fields for a six month period starting October 1 is $9.96 per mmBtu. This means that even if Reliance-bp finds buyers for 4 mmscmd of gas are willing to pay $12.11 per mmBtu, the users will have to pay only $9.96 till March 31, 2024.

Reliance-bp produces about 29-30 mmscmd of gas from three sets of gas fields in the KG-D6 block.

BlurbThe auction saw participation from across the gas consuming sectors - fertilizer, city gas distribution, refineries and aggregators. A total of 38 successful bidders secured gas through the auction process, which concluded on November 24