Reliance Industries Ltd and partner BP Plc UK have pledged money to pay for quantities of natural gas that they cannot deliver to customers from the next wave of discovery in the KG-D6 block offshore .
According to a draft gas sales and purchase agreement (GSPA) trust and BP have shared with price discovery bids for augmented gas from the R-Cluster ranges in the KG-D6 block, the retailers take refund of merchant money equal to gas received from another source to make up for any books they cannot deliver.
The buyer will be obliged on his behalf to remove or pay for (accept or pay) the promised amounts of gas.
The amounts taken only can be paid for in the subsequent numbers, the GSPA said.
These ship or pay and pay duties will be waived in the event of force majeure events such as any act of God such as earthquakes and floods, fire, epilepsy, acts of war, strike and lockout, delays due to government actions / administration and court orders.
Also, “loss, failure, obstruction, restriction in production or delivery of reservoirs in the gas fields” will be a force majeure event, he said.
A trust a decade ago was signed to sell 60 million cubic meters of average daily gas from the first set of gas fields in the KG-D6 block, but yields declined sharply due to reservoir issues, leaving users as lost power stations.
The company had not reimbursed customers for the shortage, saying it was an uncontrolled act. But the government had punished him for not making the promised books – an action the company has challenged through a settlement. The outcome of the settlement is pending.
Although these initial ranges ceased to be produced, Reliance-BP last month started producing from the R-Cluster ranges.
They sold in November 2019 the first 5 mmscmd from R-Cluster range at a level marked against Brent crude oil, the pair have now invited bids for the sale of 7.5 mmscmd of augmented products are likely to be available from February by gas criterion. index, according to an advertisement inviting bids.
Trust and BP have sought rates equivalent to JKM or Japan / Japan Natural Gas Import Price.
Candidates were asked to “state the variable known as ‘V’ in terms of $ per million British thermal units (MMBtu)”.
“Gas price (in USD / MMBtu (GCV)) = JKM + V,” the statement said.
GCV stands for total caloric value.
‘V’ can be a positive, zero or negative number and up to two decimal places, but it can’t be less than (-) 0.30 USD / MMBtu, he said.
This means that users must provide values of -0.30 or higher of ‘V’.
At the current JKM price, KG-D6 gas would cost $ 6 per mmBtu at the base or cut the price off.
This is above the $ 4.2 to 4.4 per MMBtu rate at which the first 5 mmscmd sold at Brent crude oil standard. Brent crude oil is currently in the range of $ 50 to 51 per barrel.
However, the level found will be subject to the cap imposed by the government on the price of gas. The cap for six months to March 31, 2021, is $ 4.06 per mmBtu.
Reliance-BP is investing $ 5 billion in the completion of three deep water gas projects in the KG-D6 Block R-Cluster, Satellites Cluster, and MJ – which are expected to meet about 15 percent of India’s gas demand by 2023.
The R-Cluster will have a maximum output of 12.9 mmscmd while satellites, which are expected to start production from the third quarter of the 2021 calendar year, would yield a maximum of 7 mmscmd. The MJ range will start producing in the third quarter of 2022 and will have a maximum yield of 12 mmscmd.
Reliance has so far detected 19 gas detections in the KG-D6 block. Of these, D-1 and D-3 – the largest in the lottery – were introduced since April 2009 and MA, the only oil field in the block, was put into production in September 2008.
Although the MA range ceased to last year, production from D-1 and D-3 ceased in February.
Other results were provided or removed by the government for not meeting timelines for starting production.
The block operator’s trust is with 66.6 percent interest, while BP holds what’s left.