Reliance Industries (RIL) and its UK-based partner bp plc have put on hold the planned auction to sell natural gas from the eastern offshore deepwater block — KG-D6 — following a change in the marketing rules.
The bidding process has been suspended till further notice, the companies said in a letter jointly sent by RIL and BP Exploration (Alpha) — the Indian unit of bp.
KG-D6, or Krishna Godavari Dhirubhai-6, was RIL’s first offshore gas field development and its first underwater discovery and was the country’s largest deposit of natural gas.
According to sources, the companies would issue another tender after changing the terms of the auction in accordance with the changes in the regulation.
On January 13, the ministry of petroleum and natural gas altered existing rules for sale and resale of gas from discoveries in deep sea, ultra-deep water and high pressure-high temperature areas with marketing and pricing freedom.
Under the new rules, the government intends to prioritise sale of gas for households and transport sector, followed by fertilisers, cooking gas and power, in the event that similar offers are made.
“In any situation, which may require proportionate distribution of the gas offered under the bidding process, the contractor (company selling the gas) shall offer gas to bidders belonging to compressed natural gas (transport) and piped natural gas (domestic) sector, fertiliser, LPG and power sector in that order,” the ministry had said in its order.
It had also said any leftover gas should be offered to other bidders.
As per the rules, bidders were to state upfront if they were purchasing the gas through the auction for own use or as end consumers (including for use of their group entities) or as a trader.
While end consumers were allowed to resell unconsumed gas, traders participating in the auction were allowed to resell subject to a maximum trading margin of Rs 200 per 1,000 cubic metres.
In May last year, Reliance-bp had auctioned 5.5 mscmd of incremental gas from the newer discoveries in the KG-D6 block, prior to which they had sold 7.5 mmscmd of gas.