State-owned Oil and Natural Gas Corporation (ONGC) on Monday invited bids for the sale of initial 2 million standard cubic meters per day of gas from its KG basin fields at a minimum price of USD 6.6 per mmBtu.
According to the tender document, ONGC intends to start natural gas sale from its KG-DWN-98/2 block, which sits next to Reliance Industries Ltd (RIL)-BP Plc operated KG-D6 fields, from June-end. Initially, 2 million standard cubic metres per day of gas has been offered for sale through an e-auction.
ONGC has sought bids indexed to Brent crude oil. Bids have been sought at a minimum of 10.5 per cent of the three-month average Brent crude oil price. At the current Brent crude oil price of USD 63, the minimum price comes to USD 6.6 per million British thermal unit.
This price, however, will be subject to the ceiling or cap fixed by the government for deepsea fields every six months. The cap for six months beginning April 1 is USD 3.62 per mmBtu.
This essentially means that bidders may corner gas by offering to pay USD 7, but the buyers will have to pay no more than the ceiling price of USD 3.62.
A senior ONGC official said the ceiling price is expected to rise to USD 5.5-5.6 at the next revision due on October 1.