Reliance-BP launch 4th gas auction in April

Vol 25, PW 4 (27 Jan 22) Midstream, Downstream, Renewables

Reliance and BP are planning their biggest gas auction to date from the R-Cluster, Satellite and MJ-1 fields at the KG-DWN-98/3 block off India's east coast.

This report learns Reliance-BP is preparing to invite offers for up to 12m cm/d in April (2022) through a DGH-approved e-auction with supplies slated to begin by September (2022). In three earlier tenders, Reliance-BP auctioned a combined 18m cm/d: on November 15 (2019) for 5m cm/d, on February 5 (2021) for 7.5m cm/d and on May 5 (2021) for 5.5m cm/d.

"In this (fourth) auction, bidding will be fierce," predicts a source. "Everybody wants cheap domestic gas; nobody wants to pay double or triple the price for expensive LNG."

Under present rules, Reliance-BP cannot charge more than $6.13/mmbtu for gas, in line with the government's price ceiling from discoveries in deepwater, ultra-deepwater and high-pressure high-temperature areas from October 1 (2021) to March 31 (2022). From April 1 (2022), the government is expected to have a new, and in all probability higher, six-month price cap, but this is unlikely to put off potential bidders whose only alternative is over-priced LNG.

On December 6 (2021), steelmaker Arcelor Mittal-Nippon Steel paid $31/mmbtu for a cargo sourced through Shell, while on December 14 (2022), GSPC paid around the same for a shipment at Mundra sourced through Trafigura. Thanks to some cunning behind-the-scenes rule changes, Reliance affiliate O2C will most likely walk away with the vast bulk of the 12m cm/d in this tender, as it has with the earlier three tenders, hosted by CRISIL's online web-based electronic bidding platform.

Despite O2C's obvious advantage, industry analysts expect interest from IndianOil, BPCL and HPCL; and city gas retailers, IGL, MGL, GAIL Gas, Megha Engineering, Adani-Total, IRM, MNGL, Think Gas, Torrent Gas and CGD newcomers Dinesh Engineering and Sholagasco (Pvt Ltd). Torrent Power and GAIL and GSPC, Shell, India Gas Solutions and pipeline company Pipeline Infrastructure are also likely to show interest.