After Reliance Industries Ltd, Gujarat government firm GSPC has sought imported LNG price of USD 14.2 per mmBtu for the natural gas it plans to produce from KG basin fields by year-end.
Gujarat State Petroleum Corp (GSPC) on Friday submitted a proposal to the Oil Ministry for pricing of 5.24 million standard cubic meters per day of peak output from its Deen Dayal West (DDW) gas field in block KG-OSN-2001/3 at USD 14.2 per million British thermal unit, industry sources said.
This price, the firm said, was arrived at through an arms length price discovery exercise it carried out for over a month with supervision of a neutral third party auditor.
GSPC had on February 25 asked bidders to quote a positive or a negative number to be added to India’s liquefied natural gas (LNG) import formula of 12.67 per cent of Brent crude oil plus USD 0.26 per mmBtu.
GSPC prescribed a minimum sale price of USD 8.50 per mmBtu, at floor rate of USD 65 per barrel of oil.
Sources said 37 companies put in as many as 53 bids for about 75 mmscmd. A demand far exceeding the supply was generated when the biddable variable was kept at zero. At cap oil price of USD 110 per barrel, the gas price translates into USD 14.2 per mmBtu.
This is the same formula on which RIL had sought bids to price gas from its Sohagpur coal-bed methane (CBM) block in Madhya Pradesh.
While the Oil Ministry, under the then Oil Minister S Jaipal Reddy, held back the approval for RIL’s CBM gas price discovery by putting repeat queries, it remains to be seen how GSPC’s proposal will be treated by the Ministry under M Veerappa Moily.
RIL also got an overwhelming response when over 70 bids totalling a demand of more than 90 mmscmd, several times more than the peak CBM output of 3.5 mmscmd, were received. Its proposal has, however, been languishing in the Ministry for 13 months now.
Petronet LNG Ltd, of which Oil Secretary is the Chairman, pays RasGas of Qatar a price of 12.67 per cent of the average price of crude oil imported into Japan (called Japan Crude Cocktail, or JCC). Besides, it incurs a USD 0.26 per mmBtu cost on transporting the gas in ships from the Gulf nation.
Both RIL and GSPC felt this is an arms-length pricing formula and called for bids from consumers on the same.
GSPC will produce a maximum of 5.24 mmscmd 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.
While the price sought is excluding taxes and other levies, the firm will charge an additional marketing margin of Rs 10.21 per mmBtu.