RIL-BP will launch India's first gas auction next month

NEW DELHI: India's natural gas market will witness its first electronic auction next month when Mukesh Ambani leads Trusted industries Ltd and its partner, UK energy major BP plc, starts bidding for gas of its $ 5 billion offshore project on the east coast.

This will be the first time that gas produced in a domestic field will be auctioned electronically, a practice that Narendra Modi The government had come forward to deliver the spectrum of telecommunications and coal blocks after the Supreme Court eliminated the allocation methods previously followed.

“We expect the independent agency appointed for conducting the auction will be able to conduct the auction on October 10 once the pre-requisites are completed,” a senior BP executive told TOI. CRISIL Risk and Infrastructure Solutions Ltd (CRIS) will conduct the online auction on a web-based platform and the initial price will be compared with a 9% slope from Brent.

RIL- BP is holding the sale under the policy provision of giving producers marketing and pricing freedom for gas from geographically difficult fields. For other fields, the government earmarks the quantity of gas to various industries and the price is set according to a 2014 formula, which the industry says is often non-remunerative.

Industry players said the auction by RIL- BP could prove to be a touchstone for the Centre's proposed gas exchange and indicate whether the domestic gas market is ready for large-scale competitive pricing. The government is working to raise the share of natural gas in the country’s energy basket from 6% to 15%.

RIL- BP is initially offering 5 mcmd (million cubic meters per day) of gas expected to flow from mid-2020 from R-Series fields in the KG-D6 block off the Andhra coast. This is part of three sets of discoveries in the block - R-Cluster, Satellites and MJ - being developed for a peak of 30 mcmd.

The amount offered indicates a cautious approach by the partners, who wish to avoid a repetition of a scenario that involves discoveries D-1, D-3 in the block. It is estimated that these discoveries produced a peak of 60 mcmd, but production fell drastically shortly after production began and left industries, especially in the electricity sector, in the lurch.

“We will gradually increase the amount offered as new discoveries come into operation and production stabilizes. We trust in fulfilling supply commitments. But we are still providing additional comfort to the buyers in the contract through an offer or payment clause, ”said the executive.

In another first for natural resource contracts in India, RIL-BP has also introduced anti-bribery and anti-money laundering clauses that provide for “immediate termination” of the agreement and recovery of any losses in case of violation.

They seek a compromise whereby the buyer, or its affiliates, have not bribed anyone in the past five years and none of their directors, officers or key employees has been convicted or investigated for any crime related to money laundering in the past 10 years.