Reliance-BP gas sale throws up many winners
Adani-Total Gas is the biggest CGD winner from Reliance and BP's gas auction from the MJ field at KG-DWN-98/3 amid bewilderment that Gujarat Gas stayed away.
Adani-Total won 390,000 cm/d in the auction, which closed on April 13 (2023) with supplies prioritised to gas retailers. Seven city gas retailers secured 940,000 cm/d of 6m cm/d HP/HT gas on offer over the next five years - first gas supplies were slated to start on April 16 (2023).
"Adani-Total has a large gas appetite," says a CGD source. "With 38 areas, it's among India's largest gas retailers."
Torrent Gas came second, securing 210,000 cm/d; IGL and MGL secured 100,000 cm/d each; IRM Energy 90,000 cm/d; Think Gas 30,000 cm/d and Megha 20,000 cm/d. Under the new oil ministry gas marketing regulations published on January 13 (2023), city gas retailers are prioritised for gas supplies from HP/HT fields.
"Even though the auction was linked to the Japan Korea Marker (JKM) benchmark, KG-D6 pricing is regulated by the HP/HT ceiling," adds a source. Announced on March 31 (2023), the government's price ceiling for HP/HT gas from April 1 (2023) to September 30 (2023) is $12.12/mmbtu.
Like Adani-Total, Gujarat Gas was expected to bid aggressively for MJ gas to reduce its dependency on volatile spot LNG. "But MJ gas will be more expensive than spot LNG for Gujarat Gas," we hear.
"MJ gas will cost Gujarat Gas around $14.6/mmbtu after conversion to NCV (Net Calorific Value) and the $1.13/mmbtu pipeline transmission tariff." He adds spot LNG prices currently trade at around $11/mmbtu and, with added duty and regasification charges, would cost Gujarat Gas $12.5/mmbtu at the factory gate.
Besides CGD companies, IndianOil was the largest beneficiary, securing 1m cm/d for its 11 refineries and petrochemical complexes. IndianOil also secured 1.1m cm/d for fertiliser companies under the government's pooling system to buffer against high prices for this politically strategic sector.
Nagarjuna Fertilisers procured another 1m cm/d. "Fertiliser factories were expected to bid aggressively but didn't," says a gas industry consultant.
"That's because fertiliser producers prefer a three-year contract against the five-year contract offered in this auction." Under government rules, fertiliser factories can only buy long-term gas for three years.