Gas retailers scoop MJ-1 gas
Amid an upcoming reduction in domestic gas supplies by the government to the CNG sector, gas retail and fertiliser companies bid aggressively in a 4m cm/d auction from Reliance and BP's KG-DWN-98/3 block.
On November 24 (2023), priority sector CGD and fertiliser companies won 3.66m cm/d from the MJ-1 field, leaving just 340,000 cm/d for steel, ceramics and other non-priority customers. Gujarat Gas was the biggest winner, securing 500,000 cm/d, Torrent Gas followed with 450,000 cm/d, Indraprastha Gas and Mahanagar Gas won 300,000 cm/d each, Adan-Total Gas won 290,000 cm/d and IOAGPL walked away with 170,000 cm/d.
AG&P, Megha, Maharashtra Natural Gas, and IndianOil together won 200,000 cm/d. CGD companies were allocated 2.21m cm/d, while fertiliser companies got 1.45m cm/d to be supplied through IndianOil.
All quoted the oil ministry-set maximum price of $9.96/mmbtu on a gross calorific value basis for six months to March 31 (2024). Bidders also had to quote the gas price as 12.67% of the Brent (crude oil) price plus the biddable variant "V' - where $1.98/mmbtu was the highest number bid - for four-year contracts.
This price will come into effect in 2026, when gas pricing promises to be fully market-linked. Many expected priority sector customers to bid for 60% of MJ-1 gas, leaving the rest to the non-priority sector.
However, a source tells us that CGD and other priority sector customers bid for 91.5% of the gas on offer because domestic gas allocation by the oil ministry for the CNG segment has been reduced to 71.88%from 77.81% with effect from December 16 (2023). MJ-1 gas will flow from 6am local time on December 9 (2023) from the Gadimoga landfall point in Andhra Pradesh, delayed from the original December 1 (2023) schedule, and will likely continue for up to 10 years.
Reliance and BP plan to sign contracts within seven days of the auction or by December 1 (2023).