Reliance Industries Seeks Bids For Sale Of KG-D6 Gas At JKM-linked Prices

Reliance Industries Ltd and its UK partner, bp plc, have sought bids for the sale of natural gas from the eastern offshore KG-D6 block at a price linked to the price of LNG delivered to Japan and Korea.

According to the tender document, the two partners invited bids for the sale of 6 million standard cubic metres per day of gas beginning in February 2023.

Users such as city gas operators who convert gas into CNG for sale to automobiles and pipe it into household kitchens for cooking, power plants that use it to generate electricity and fertiliser units that use it to make urea have been asked to quote the premium they are willing to pay over the JKM price.

JKM is the spot price index for LNG delivered ex-ship to Japan and Korea in Northeast Asia. The February JKM price is USD 28.83 per million British thermal units.

Bidders have been asked to provide the variable 'V' in the gas price formula 'JKM + V'.

The starting bid for 'V' is USD (minus) 0.30 per mmBtu. According to the tender document, “each Bidder is required to enter bids that are higher than or equal to the starting.”

It stated that the maximum valid bid for 'V' shall be USD 5.01 per mmBtu, after which the bid shall not be accepted by the e-bidding portal.

It stated that the gas price would be the higher of the government-set ceiling price for gas produced from deep-sea fields or the lower of the bidding price and the ceiling price.

Reliance-pb auctioned 5.5 mmscmd of incremental gas from the newer discoveries in the KG-D6 block in May of last year, benchmarking it to the same JKM gas marker.

Reliance and its affiliates picked up three-fourths of that volume.

The price found in that e-auction was USD 0.06 lower than the JKM (Japan-Korea Marker) LNG price.

Previously, the pair had sold 7.5 mmscmd of gas to JKM at a USD 0.18 per mmBtu discount.

The government establishes a cap or ceiling rate for selling natural gas from difficult fields such as deepsea. This cap is USD 12.46 per mmBtu from 1 October 2022 to 31 March 2023.

Reliance has made 19 gas discoveries in the KG-D6 block so far. D-1 and D-3, the two largest, went into production in April 2009, and MA, the only oilfield in the block, went into production in September 2008.

While the MA field stopped producing in 2020, the D-1 and D-3 fields stopped producing in February 2021.

Since then, Reliance-bp has invested USD 5 billion in bringing three deepwater gas projects in block KG-D6 to production: R-Cluster, Satellites Cluster and MJ, which are expected to meet about 15 per cent of India's gas demand by 2023.