Reliance Industries and BP scouts for natural gas buyers
NEW DELHI: Reliance Industries and BP are seeking buyers for natural gas from their $5-billion deep sea project in the KG D6 block at a time when rates have crashed due to global supply glut.
RIL and BP, which are jointly developing three fields named R-Cluster, Satellites and MJ in KG basin, have launched the process to auction 5 million metric standard cubic meters per day of gas from the R-Cluster field that is slated to start production in April-June 2020. This will be the first output from three fields, which are expected to produce 1 billion cubic feet a day when fully developed in 2022. CRISIL Risk and Infrastructure Solutions Ltd will manage the bidding process and evaluate the bids, which must be submitted electronically on October 10. A bidder will have to quote a price (expressed as a percentage of the dated Brent), supply period, and the volume of gas required. Dated Brent means the average of published Brent prices for three calendar months immediately preceding relevant contract month in which gas supplies are made.Bidders can’t quote below 9% of dated Brent price. So, at Thursday’s Brent oil price of $60.71/ barrel, the floor price would be $5.46/m metric British thermal unit (mmBtu). The governmentset ceiling for gas from difficult fields, currently at $9.32/ mmBtu, would act as the cap. The global supply glut has sharply cut rates of liquefied natural gas (LNG) to below $4 per mmBtu in the spot market. Indian Oil Corp reportedly bought an LNG cargo last month for $3.69 per mmBtu, equal to the domestic formula price for gas from ordinary fields.