ONGC seeks minimum $4 for CBM gas

• 

India’s top oil and gas producer ONGC is seeking a minimum price of US$3.5-4 for the natural gas it plans to produce from coal seams in Jharkhand and a field in Tripura. Oil and Natural Gas Corporation (ONGC) has issued separate tenders seeking buyers of 0.02 million standard cubic meters per day (mmscmd) of coal-bed methane (CBM) it plans to produce from the North Karanpura CBM block in Jharkhand and 0.1 mmscmd from Khubal field in Tripura.

For the CBM gas, it asked buyers to quote a percentage equal to or higher than 8 per cent of Dated Brent Price, according to the tender document. “Floor price shall be the higher of the US$4 per million British thermal unit (mmBtu) or Domestic Gas Price notified by (government’s) PPAC for the period,” it said.

The PPAC notified price for the six months beginning October 1 for gas from fields given to ONGC and Oil India Ltd on a nomination basis is US$ 2.9 per mmBtu. ONGC has been complaining that the government-notified gas price is way below cost and the company incurs a loss of production and sale of natural gas from most of its fields. It says its cost of production ranges from US$4.5 to US$9 per mmBtu for gas from different sources/fields.

For gas from Khubal field, it sought a mark-up over the domestic gas price +(plus) US$ 0.5 per mmBtu. The floor or minimum price was set at US$3.5 per mmBtu, according to the tender. Earlier this year in April, ONGC had sought bids for the sale of an initial two mmscmd of gas from its KG basin fields. It had sought bids indexed to Brent crude oil for the gas from the KG-DWN-98/2 or KG-D5 block, which sits net to Reliance Industries Ltd (RIL)-BP Plc-operated KG-D6 fields in the Bay of Bengal. Bids were sought at a minimum of 10.5 per cent of the three-month average Brent crude oil price. At Brent crude oil price of USD 70, the minimum price came to USD 7.35 per mmBtu.

In the latest tender, ONGC has mentioned a 3 to 5-year sale tenure for CBM gas, with supplies commencing with immediate effect. ONGC owns 55 per cent in the North Karanpura CBM block in the Ranchi district of Jharkhand. Indian Oil Corporation (IOC) holds 20 per cent and Prabha Energy Pvt Ltd the remaining 25 per cent. For Khubal field, the gas supplies are to begin from April 2024 and bids have been sought for 3 to 5 years tenure.