<article><p class="lead">Indian private-sector refiner Reliance Industries (RIL) and BP have resumed an auction to sell natural gas from their eastern offshore Krishna-Godavari (KG)-D6 block, after incorporating the Indian government's marketing rules changes.</p><p>The partners originally planned for the auction to take place in January, but <a href="https://direct.argusmedia.com/newsandanalysis/article/2409796">had to suspend it</a> after the government tweaked its marketing rules for the resale of gas produced from deepwater, ultra-deepwater as well as high-pressure and high-temperature fields — which it terms as difficult fields — that essentially capped trading margins.</p><p>The auction — now set for 31 March — will give city gas companies that sell compressed natural gas (CNG) priority over supplies, followed by fertilizer firms, power plants, and other consumers and traders, in line with the government's revised marketing rules. The consortium is looking to sell 6mn m³/d of gas from "difficult fields" located in the KG basin off India's east coast in the e-auction, a tender notice showed. </p><p>Supplies are to start from 16 April, with RIL and BP increasing the duration of supply to five years from the three years offered in the January auction. The gas will be priced based on a formula linked to an Asian index, but will be subject to a government-notified ceiling price. The ceiling price for production from these fields is set at $12.46/mn Btu until 31 March, compared with $8.57/mn Btu for conventional gas produced by state-controlled firms. </p><h3>Marketing rule changes</h3><p class="lead">The marketing rule changes come as the government has prioritised gas supply to the city gas distribution network over other sectors since late last year. The rules also require bidders to specify whether they want to purchase gas through the auction for their own use or as traders.</p><p>Traders taking part in the auction are allowed to resell the gas to the urea and residential gas industries with a maximum trading margin of 200 rupees/1000m³ ($2.45/1,000m³) for this year. Trading margins for other industries have been pegged to margins in a contract that these industries have signed with state-controlled importer Petronet LNG at Rs16.62/mn Btu for 2023.</p><p>The gas is set to flow from RIL's onshore gas terminal at Gadimoga, Andhra Pradesh to Indian gas pipeline operator PIL's 1,375km pipeline which runs from Kakinada in Andhra Pradesh to Bharuch in Gujarat. </p><p>Bidders have been asked to quote variable 'V' in the gas price formula of 'index plus V'. The starting bid for 'V' has been set at -$0.42/mn Btu, with the maximum bid set at $2.01/mn Btu, the tender showed. The gas price will be lower than the government-set ceiling price for gas produced from deep-sea fields or the price arrived at the bidding. </p><h3>Natural gas production</h3><p class="lead">RIL <a href="https://direct.argusmedia.com/newsandanalysis/article/2411989">sees its natural gas production rising</a> from the KG-D6 block, as its share of production from its Satellite Cluster and R Cluster gas fields rose to 12.9mn m³/d for October-December 2022, up by 5.3pc from a year earlier, out of a total output of 19mn m³/d. </p><p>RIL and BP are jointly developing three main gas fields in the KG basin, including the MJ deepwater field in the last phase. They are set to commission their MJ deepwater gas fields this month, which were disrupted late last year by marine system testing. The consortium aims to raise output from the KG-D6 block to 30mn m³/d in the April 2023-March 2024 fiscal year after they commission the MJ fields.</p><p>India's domestic supplies meet only a part of its domestic needs. The country's LNG import dependency rose to 2.25bn m³ in February, up by 11pc on the year. India's gas consumption was at 4.84bn m³ in February, above 4.53bn m³ a year earlier. Domestic gas production rose to 2.6bn m³ from 2.3bn m³ a year earlier. </p><p class="bylines">By Rituparna Ghosh</p></article>
