Reliance-BP joint venture in India on Feb. 5 awarded 7.5 million standard cu m/day, or nearly 2 million mt/year, of LNG equivalent gas from its east Indian off-shore KG-D6 basin on a JKM-linked basis for tenure of three to five years, sources said on Feb. 8. The supply is expected to begin soon, the sources said.
Reliance O2C Ltd., a Reliance affiliated entity, was heard to have been awarded majority of the gas supply, amounting to 4.8 million standard cu m/day. GAIL, Shell, Adani Total Gas, HPCL, and IRM Energy were heard to have been awarded 0.85, 0.70, 0.09, 0.23 and 0.10 million standard cu m/day, respectively.
Pipeline Infrastructure Ltd., or PIL, and India Gas Solutions, or IGS, were heard awarded 0.35 million standard cu m/day each. Torrent Gas and Power Ltd. and Enertech were heard awarded 0.02 million standard cu m/day each. Reliance did not immediately respond to a request for comment.
The tender was heard awarded at a price of JKM minus 18 cents/MMBtu on an ex-Gadimoga, near Kakinada, basis, which would equate to $7.844/MMBtu, $6.42/MMBtu, $5.92/MMBtu, $5.77/MMBtu and $5.89/MMBtu for calendar year 2021-2025, respectively, as per the JKM derivatives forward curve as on Feb. 5, calculations showed.
However, the selling price of the tender would be capped by the price ceiling set by the Petroleum Planning and Analysis Cell for the gas produced from KG-D6 basin. The gas price ceiling for gas produced from discoveries in Deepwater, Ultra Deepwater and High Pressure-High Temperature areas set by PPAC for October 2020–March 2021 was at $4.06/MMBtu. PPAC sets the gas price ceiling on a bi-annual basis for April-September and October-March.
The average delivered price for gas to the west coast consumers from 2021-2025 basis the JKM forward curve on Feb. 5 and adding about $1.232/MMBtu transportation tariff and taxes via the PIL East-West pipeline would be about $7.601/MMBtu, without the price ceiling. However, the pipeline tariff might be revised lower once the Petroleum and Natural Gas Regulatory Board announces the unified pipeline tariff for the Indian gas network.
In comparison, West India Marker derivative forward curve for 2021-2025 published by ICE on Feb. 5, equated to $5.855/MMBtu. Accounting for 2.75% import duty, current regasification charges at Dahej terminal, 18% GST on regasification charges and re-gas loss, the cost of RLNG on an ex-terminal basis in Dahej would be around $6.821/MMBtu.
Reliance-BP joint venture had sold 5 million standard cu m/day of gas from KG-D6 basin in November 2019 at 8.5%-8.6% of Dated Brent to Adani Total Gas, ArcelorMittal Nippon Steel and GAIL. The price would equate to about $4.70-$5.60/MMBtu, with Brent price around $55-$65/barrel.
The tender by Reliance-BP joint venture was not the first instance of domestic gas supply tenders being linked to a spot LNG price benchmark. Oil and Natural Gas Corp. Ltd., or ONGC, and Cairn Oil and Gas have issued tenders linked to WIM previously.
JKM, published by Platts, is the benchmark for spot LNG prices delivered to Japan, South Korea, Taiwan, and China. WIM, also published by Platts, is the benchmark for spot LNG prices delivered to the India-Middle East demand hub.
Supply from Reliance-BP's R-Cluster, MJ field and other satellites in the KG-D6 block has a peak production capacity of over 30 million standard cu m/day. The new domestic gas production in India will continue to compete with spot LNG prices as India looks to increase its LNG infrastructure and boost its gas consumption in the energy mix from currently at 6.2% to 15% by 2030.
