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Gujarat govt company, GSPC, takes cue from Reliance Industries, seeks imported LNG price for KG basin gas

Feb 25 2013, 16:21 IST
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SummaryTaking a cue from Reliance Industries, Gujarat-government firm GSPC is seeking to price natural gas it will produce from KG basin block at a rate indexed to cost of imported liquid gas (LNG).

Taking a cue from Reliance Industries, Gujarat-government firm GSPC is seeking to price natural gas it will produce from KG basin block at a rate indexed to cost of imported liquid gas (LNG).

Gujarat State Petroleum Corp Ltd (GSPC) wants to price gas that it will produce from Deen Dayal West (DDW) gas field in block KG-OSN-2001/3 by third quarter of 2013, at a minimum of USD 8.50 per million British thermal unit, excluding local taxes and margin.

GSPC, owned by the Gujarat government, will produce a maximum of 5.24 million standard cubic meters per day of gas from the offshore DDW gas field. The gas will land at Mallavaram, near Kakinada in Andhra Pradesh, and can be ferried to customers up to Gujarat through Reliance Gas Transportation Infrastructure Ltd's East-West pipeline.

The company in an advertisement issued in national and regional dailies invited bids from potential consumers at price formula at which Petronet LNG gets liquefied natural gas (LNG) from Qatar on a long-term contract.

GSPC sought 12.67 per cent of the average Brent crude oil price plus USD 0.26 per million British thermal unit. It asked users to quote a positive or negative number, termed as 'V', that can be added to this pricing formula.

"Brent crude oil price will be capped at USD 110 per barrel and floor of the Brent crude oil price will be USD 65," it said in the advertisement.

Considering 'zero' as the value of the quotable component 'V', the DDW gas will cost about USD 14.2 per mmBtu at the cap price of USD 110.

"Even if bid value of 'V' is negative, floor gas price will always be USD 8.50 per mmBtu," GSPC said.

A year back, RIL had sought to price gas it will produce from below coal seams, called coal-bed methane (CBM), from its Sohagrpur blocks in Mahdyra Pradesh at 12.67 per cent of the average price of crude oil imported into Japan (called Japan Crude Cocktail, or JCC) plus USD 0.26 per mmBtu.

Petronet pays RasGas of Qatar a price of 12.67 per cent of JCC, besides incurring a USD 0.26 per mmBtu cost on transporting the gas in ships.

Unlike GSPC, RIL did not set any floor or cap. At a USD 100 per barrel JCC average, CBM was to cost USD 12.67 per mmBtu plus USD 0.26 per mmBtu, totalling USD 12.93 per mmBtu.

GSPC, which sought bids by March 12, said it will charge an

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