Reliance, affiliates buy 3/4 of KG-D6 gas volumes
Billionaire Mukesh Ambani’s Reliance Industries Ltd and its affiliates have picked up more than three-fourths of the new gas volumes from the firm’s eastern offshore KG-D6 block which at current government dictated price will cost it less than half of the imported rate, sources said. Reliance and its partner UK’s BP Plc last week auctioned 5.5 million standard cubic meters per day of incremental gas from the newer discoveries in the KG-D6 block, benchmarking it to a gas marker. Reliance’s oil-to-chemical (O2C) business unit picked up 3.2 mmscmd gas in the auction, three sources with direct knowledge of the development said. India Gas Solutions (IGS) – a gas sourcing and marketing joint venture of Reliance and BP – picked up another 1 mmscmd, they said. The remaining volume was picked by Adani Gas (0.15 mmscmd), IRM Energy (0.10 mmscmd), GAIL (30,000 cubic meters per day) and Torrent Gas (20,000 cubic meters per day). Sources said the price discovered in the e-auction came at a USD 0.06 discount to the JKM (Japan-Korea Marker) LNG price. At current prices, this translates into a price of USD 8-9 per million British thermal unit (mmBtu) but the buyers will end up paying less than half of this rate. The government sets a cap or ceiling rate at which natural gas from difficult fields like deepsea can be sold. This cap for the period April 1, 2021 to September 30, 2021 is USD 3.62 per mmBtu. “The lower cap means that even though the buyers are willing to pay higher rates, gas will be sold at a lower rate. The lower rate will benefit the buyer and give the producer a less remunerative price. More importantly, the government stands to lose millions of dollars in lesser royalty and taxes at lower rate,” one of the sources said. E-mails sent to Reliance and BP for comments remained unanswered. In last week’s e-auction, Reliance-BP had asked bidders to quote a price linked to Platts JKM, the liquefied natural gas (LNG) benchmark price assessment for spot physical cargoes. The lowest bid that could be placed was JKM minus USD 0.3 per mmBtu. The highest acceptable bid would be JKM plus USD 2.01 per mmBtu. The auction closed at JKM minus USD 0.06 per mmBtu, sources said. This is the same benchmark the RIL-BP had used in February to sell out 7.5 mmscmd of gas from the block. In that auction too, RIL picked up two-thirds of the 7.5 mmscmd gas sold. Reliance O2C picked up 4.8 mmscmd of gas while state gas utility GAIL (India) won 0.85 mmscmd of supplies and Shell 0.7 mmscmd. Adani Total Gas got 0.1 mmscmd, Hindustan Petroleum Corporation Ltd (HPCL) 0.2 mmscmd and Torrent Gas 0.02 mmscmd. Other buyers include IRM Energy (0.1 mmscmd), PIL (0.35 mmscmd) and IGS (0.35 mmscmd). Sources said the gas in the auction was bought at a price of USD 0.18 per mmBtu discount to JKM i.e. price of JKM (minus) USD 0.18 with tenures ranging from 3 to 5 years. Reliance O2C is the new unit that holds the firm’s refinery and petrochemical assets. Last week’s auction was the third time Reliance-BP conducted an e-bidding process which ran on a dynamic forward auction basis for sale of KG-D6 gas. In November 2019, 5 mmscmd of natural gas was sold at price in the range of around 8.6 per cent of Brent crude oil for tenure ranging from 2 to 6 years. Reliance-BP started production of gas on December 18 last year from the R Cluster ultra-deep-water gas field in block KG D6 off the east coast of India. Essar Steel, Adani Group and GAIL had bought the majority of gas sold in that auction by bidding between 8.5 and 8.6 per cent of dated Brent price. Reliance-BP is investing USD 5 billion in bringing to production three deepwater gas projects in block KG-D6 R-Cluster, Satellites Cluster, and MJ which together are expected to meet about 15 per cent of India’s gas demand by 2023. R-Cluster will have a peak output of 12.9 mmscmd while satellites, which started producing a couple of weeks back, would produce a maximum of 7 mmscmd. MJ field will start production in the third quarter of 2022 and will have a peak output of 12 mmscmd. Reliance has so far made 19 gas discoveries in the KG-D6 block. Of these, D-1 and D-3 — the largest among the lot — were brought into production from April 2009 and MA, the only oilfield in the block was put to production in September 2008. While the MA field stopped producing last year, output from D-1 and D-3 ceased in February. Other discoveries have either been surrendered or taken away by the government for not meeting timelines for beginning production. Reliance is the operator of the block with 66.6 per cent interest while BP holds the remaining stake.
Diesel doped with biodiesel made from used cooking oil rolled out
India on Tuesday began experimenting with doping diesel with a small portion of biodiesel extracted from leftover cooking oil in kitchens to cut reliance on imports as well as reducing carbon emissions. Diesel, India’s most used fuel, is made from crude oil, for which the nation is 85 per cent dependent on imports. Imports can be reduced if a portion of diesel extracted from fossil oil is supplemented by an equally combustible diesel. Bio-diesel that can be produced from vegetable oil, animal fat, tallow and waste cooking oil, Indian Oil Corporation (IOC) Chairman S M Vaidya said at a function to launch diesel doped with used cooking oil (UCO). To start with, 7 per cent biodiesel extracted from UCO is being doped in diesel and the supply of such fuel was started on Tuesday. As much as 23 million tonnes of edible oil is consumed in the country annually. Out of this, 3 million tonnes of oil is discarded after use and is called used cooking oil, he said. “There is a potential to generate 222 crore litres of UCO annually but no structure exists for collection of waste cooking oil,” he said. To encourage this, the oil companies floated an expression of interest (EoI) seeking biodiesel made from UCO, offering a fixed price for five years and a guaranteed offtake for 10 years. As many as 30 LOIs have been issued at the industry level (by IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) which will give 26.62 crore litre of biodiesel in years to come, it was informed at the function. India consumed 72.7 million tonnes (about 8,000 crore litres) of diesel in the fiscal year ended March 31, 2021. The first lot of used cooking oil-based biodiesel blended diesel was flagged off by Oil Minister Dharmendra Pradhan. “So far, IOC has also issued 23 LOIs for biodiesel plants with a total capacity of 22.95 crore litres. Under this initiative, IOC has received 51 kilolitres of UCO-Biodiesel at its Tikrikalan terminal in Delhi as of March 31,” the company said in a statement. Speaking on the occasion, Pradhan said, “This is a landmark in India’s pursuance of biofuels and will have a positive impact on the environment. This initiative will garner substantial economic benefits for the nation by shoring up indigenous Biodiesel supply, reducing import dependence, and generating rural employment”. Oil Secretary Tarun Kapoor said with this flag off, a new era of Bioenergy has been ushered in that will revolutionise the Indian petroleum sector. “Feedstock availability in Biodiesel is a challenge, and leveraging UCO can be a major breakthrough that will enable us to reach the target of 5 per cent biodiesel blending. It will also help divert the unhealthy used oil from the food chain to a more productive purpose,” he said. Vaidya said the initiative will retrieve the unhealthy used cooking oil. “We aspire to trace even the last drop of UCO and ensure its conversion to biodiesel, thereby contributing to a more energy secure, greener and healthier India.” IOC, he said, started constructing eight biodiesel plants across Uttar Pradesh, Gujarat, and Madhya Pradesh. Biodiesel is an alternative fuel similar to conventional or ‘fossil’ diesel. It can be produced from vegetable oil, animal fats, tallow and waste cooking oil. A significant advantage of Biodiesel is its carbon-neutrality, i.e. the oilseed absorbs the same amount of CO2 as is released when the fuel is combusted in a vehicle. Also, Biodiesel is rapidly biodegradable and completely non-toxic.