Reliance set a floor or minimum quote of 9 per cent of dated Brent price -- which means bidders would have to quote 9 or a higher percentage for seeking gas supplies.
Reliance Industries has put off bidding for the new gas it plans to produce from eastern offshore KG-D6 block to next month following a request from potential bidders, sources said.
Reliance and its partner BP Plc of the UK, last month had put out Notice Inviting Offer (NIO) seeking bids from potential users for the 5 million standard cubic meters per day of natural gas they plan to produce from the R-Cluster Field in KG-D6 block from the second quarter of 2020.
The bidding was to happen on October 11, according to the bid document.
However, the bidding has been postponed based on requests of some bidders given the holiday/festival period during October, sources said adding that bidding will now happen on November 6.
Bidders have been asked to quote a price (expressed as a percentage of the dated Brent crude oil rate), supply period and the volume of gas required.
Dated Brent means the average of published Brent prices for three calendar months immediately preceding the relevant contract month in which gas supplies are made.
Reliance set a floor or minimum quote of 9 per cent of dated Brent price — which means bidders would have to quote 9 or a higher percentage for seeking gas supplies.
At USD 60 per barrel price, the gas price comes to USD 5.4 per million British thermal unit (mmBtu).
The rate sought compares to the government-mandated USD 3.23 price that its currently producing Dhirubhai-1 and 3 fields in KG-D6 block get.
The government gas pricing policy, however, provides for a higher cap price for future gas produced from difficult fields like those in deepsea. This cap currently is fixed at USD 8.43 per mmBtu.
Reliance-BP is developing three sets of discoveries in KG-D6 block — R-Cluster, Satellites and MJ — by 2022 that can produce a peak of 30 mmscmd of gas.
The quantity offered for bidding in the NIO is 5 mmscmd from R-Series fields which will start production in mid-2020.
Sources said, peak output from R-Series is 12 mmscmd, while Satellites will produce another 7 mmscmd beginning mid-2021. MJ field, which will start production in the second half of 2022, also has a planned peak output of 12 mmscmd.
The NIO said the gas price would be lower of the quoted rate or the government-mandated ceiling for the difficult fields.
The formula Reliance is using to price gas for R-Series fields is different from its last price discovery it made for the coal seam gas (CBM) from its Sohagpur coal-bed methane blocks in Madhya Pradesh.
For Sohagpur CBM, it had in 2012 sought bids at a benchmarked rate at 12.67 per cent of JCC, or Japan Customs-Cleared Crude, plus USD 0.26 per mmBtu.
The formula was the same at which Petronet LNG, a joint venture of public sector oil companies, whose chairman is the oil secretary, used to buy long-term liquefied natural gas (LNG) from Qatar.
At USD 60 per barrel oil price, CBM from its Madhya Pradesh block was to cost USD 7.8. That formula was, however, rejected by the oil ministry even though 59 valid bids seeking about 70 mmscmd of gas were received in the open tender.
In 2017, it changed the formula by seeking bids in the form of a deductible from 12.67 per cent of prevailing Brent crude oil price plus USD 0.52 per mmBtu plus USD 0.26 per mmBtu, according to the bid document of CBM pricing.