Reliance Industries and other producers of natural gas will no longer need the government approval for the gas price if it is arrived at using the new guidelines for the discovery of market price, an official order said.
The Ministry of Petroleum and Natural Gas last week notified guidelines for the discovery of market prices for domestically produced natural gas through e-bidding.
The government has since 2017 given pricing freedom for natural gas produced from all fields other than the old fields of State-owned ONGC and Oil India Ltd. in nomination blocks.
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Firms such as Reliance Industries-BP combine as well as ONGC (for non-nomination blocks) have been auctioning gas to users. They would typically devise a formula and seek bids from users.
They will continue to devise a pricing formula, but will now have to seek bids on the electronic-platform of five pre-selected agencies, the notification said.
The agencies are SBI Capital Markets Ltd., mjunction Services Ltd., RITES, MSTC and CRISIL Risk and Infrastructure Solution Ltd.
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This follows the Union Cabinet in October allowing marketing freedom for blocks where pricing freedom already existed. Alongside, it approved standardised bidding for price discovery.
The companies “shall design the tender/ bid offer, including the eligibility criteria, bid parameters, evaluation criteria, tender fee, salient terms and conditions of Gas Sales Agreement and any other relevant information etc., with a view to encourage wider participation from prospective buyers, promote competition and maximise the value of natural gas offered,” it said.
ONGC and OIL are also to follow these guidelines for the discovery of the market price of natural gas produced from their fields wherever pricing and marketing freedom has been granted, the order said.
“The existing gas sales agreements, made in connection with contract provisions, would continue till the duration of the agreements/contracts and thereafter subsequent sale of gas shall be subject to these guidelines,” it added.
Reliance and its partner BP have sold initial 5 million standard cubic metres per day of gas from their second wave of discoveries in the KG-D6 block for five years.
ONGC too has sold initial gas from the neighbouring KG-D5 block.
The two will use the new guidelines whenever the existing contracts expire or they have additional quantities of gas to offer.
The order said the companies must ensure at least 21 days’ time for bidding.
They have to submit to the Directorate General of Hydrocarbons (DGH) details of the auction such as a list of participants, qualified bidders and selected bidders with their price and quantity allocated.
“The entire proceeding will be conducted by the contractor/producer without any need for the approval of the government,” the order said. “The government, however, will have the right to ask for information and intervene if there are reasons to believe that there is foul play.”
The companies have to invite bids from prospective buyers of natural gas through an e-bidding portal, it said.
“National oil companies, viz ONZC and OIL shall also follow the guidelines for the discovery of market price of natural gas produced from their nomination fields wherever pricing and marketing freedom has been granted,” it said.
While the price of gas produced from nomination fields is dictated by the government, ONGC and OIL have the freedom to sell gas from difficult fields such as deep sea.