HOEC prepares for another B-80 gas auction
Despite its past technical problems, HOEC has good news to report from its offshore Mumbai DSF-1 block MB/OSDSF/B-80/2016 (B-80).
HOEC is preparing to sell additional gas from B-80 through an online auction on March 15 (2024) after selling its first lot of over 400,000 barrels of oil to IndianOil on January 30 (2024) at $80.27/barrel. HOEC invited offers on February 20 (2024) for the e-auction, which it will hold through the DGH-approved online platform mjunction.
On offer is a commitment to deliver 93,000 cm/d for one year from April 1 (2024). Any company can bid for the entire 93,000 cm/d with the delivery point at ONGC's Hazira gas processing complex in south Gujarat.
Whoever wins must take at least 75% of their annual contracted quantity or pay a penalty. Bidders must quote a "variable premium" to the previous month's average Brent price.
HOEC already supplies 300,000 cm/d to GSPC under a two-year Brent-linked contract, which began in April 2022. "We don't want a repeat of what happened in 2022," stresses a company source.
"GSPC did not honour the price agreed in the contract." In early August 2022, HOEC was forced to shut down B-80 production because of persistent technical problems.
GSPC was unhappy with the delay and renegotiated the price, paying $13.5/mmbtu in November 2022 and $14/mmbtu in December 2022 based on prices gleaned from the Indian Gas Exchange (IGX). "In January 2023, GSPC finally honoured the contract paying 22.2% of the Brent price ($18/mmbtu)," we hear.
GSPC currently pays $19.98/mmbtu to HOEC, which must use ONGC's facilities to pipe the gas to shore. After treatment at HOEC's Mobile Offshore Production Unit (MOPU), the gas is transported through an ONGC pipeline to the Hazira gas processing complex.
HOEC pays a separate tariff to ONGC for the transfer, and the gas 'custody transfer' happens at Hazira, where the gas enters the GAIL network. GSPC must book capacity in the GAIL pipeline to deliver gas to its customers.