India’s Reliance Industries KG-D6’s control and raiser platform is seen off the Bay of Bengal in this undated handout photo. India’s Reliance Industries Ltd resumed crude oil production from its east coast MA-1 field on March 8 following an emergency shutdown in December, Upstream Regulator V.K. Sibal said on March 12, 2009.
| Photo Credit: Reuters

Reliance Industries Ltd is seeking a premium of at least $3.5 per barrel over an international benchmark for crude oil it produces for eastern offshore KG-D6 block, according to the tender the firm put out on Monday.

Reliance and its partner BP of the UK sought bids from domestic refiners for sale of 17,600 barrels (2,800 kilolitres) of crude oil every month from April 2025 to February 2026.

The crude oil has been priced at daily average price of Nigerian Bonny Light grade of crude oil plus $1.5 per barrel quality premium. Bidders have to quote a premium over this price, the tender document said.

Bonny Light last traded for $73.5 per barrel. On top of this, $1.5 per barrel is added as a composite premium “reflecting quality differential”, it said, adding that interested buyers are required to a “biddable premium, up to one decimal place and greater than $2 per barrel”.

The sale period can be extended by three months to one year on the same terms and conditions, including pricing formula.

Oil, which is turned into fuels like petrol and diesel when processed at refineries, will be delivered by the sellers at Gadimoga in East Godavari district of Andhra Pradesh.

Reliance holds 66.67% interest in the predominantly gas-rich KG-DWN-98/3 block (KG-D6) in the Bay of Bengal. BP Exploration (Alpha) Ltd holds the remaining 33.33%.

The two produce about 30 million standard cubic metres per day of gas from the block. A small quantity of crude oil is also produced, for which they have now sought bids.

Bids are due on January 24, 2025, the document said.

“The crude oil sold and delivered shall only be consumed/processed/refined in the buyer’s owned and operated facility/(ies)/refinery/(ies) located within India,” it added.

All taxes and duties, including excise duty, VAT, GST, will be paid by the buyer.

Representational file image.
| Photo Credit: Getty Images

The price of natural gas produced from difficult areas like KG-D6 of Reliance Industries is likely to be cut by about 14% from next month in line with softening energy prices, sources said.

For the six-month period starting October 1, the price of gas from deep sea and high-pressure, high-temperature (HPTP) areas is likely to be cut to around USD 10.4 per million British thermal unit from the current $12.12, they said.

The government bi-annually fixes prices of the locally-produced natural gas — which is converted into CNG for use in automobiles, piped to household kitchens for cooking and used to generate electricity and make fertilisers.

Two different formulas govern rates paid for gas produced from legacy or old fields of national oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), and for newer fields lying in difficult-to-tap areas, such as deepsea.

Rates are fixed on April 1 and October 1 each year.

In April this year, the formula governing legacy fields was changed and indexed to 10 per cent of the prevailing Brent crude oil price. The rate was however capped at $6.5 per mmBtu.

Rates for legacy fields are now decided on a monthly basis. For September, the price came to $8.60 per mmBtu but because of the cap, the producers would get only $6.5.

Brent crude oil has averaged around USD 94 per barrel this month but rates will continue to be capped at $6.5.

Sources said the price for difficult area gas continues to be governed by the old formula that takes one-year average of international LNG prices and rates at some global gas hubs with a lag of one quarter.

International prices had fallen in the reference period of July 2022 to June 2023 and so it will translate into lower prices for difficult fields, they said.

The price for gas from difficult fields was cut to USD 12.12 per mmBtu for a month period, beginning April 1 from a record $12.46 earlier.

The global spurt in energy prices after Russia’s invasion of Ukraine has led to rates of locally-produced gas climbing to record levels — $8.57 per million British thermal unit for gas from legacy or old fields and $12.46 per mmBtu for gas from difficult fields between October 2022 and March 2023.

On April 1, prices of gas from legacy fields were slated to climb to $10.7 per mmBtu using the old formula. But the government changed the formula and put a cap to keep inflation under check.

Rates of CNG and piped gas for kitchens had risen by 70% because of the previous gas price hike.

The ceiling price covers the cost of production of producers while protecting consumers, particularly CNG users, kitchens using piped cooking gas and fertiliser plants which had grappled with soaring input costs.

India is aiming to become a gas-based economy with the share of natural gas in its primary energy mix targeted to rise to 15% by 2030 from the existing level of around 6.3%.