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Thursday, June 24, 2021

ONGC waives marketing margin, refuses reserve price cut for KG basin gas

ONGC had last month called for bids for the sale of 2 mmscmd (million metric standard cubic meter per day) of gas from its KG-DWN 98/2 block.

By: ENS Economic Bureau | New Delhi |
May 14, 2021 3:01:55 am
ONGC’s KG-DWN 98/2 block is expected to have a peak production rate of 15.25 mmscmd of natural gas. (File)

State-owned ONGC has rejected calls by potential bidders to cut the reserve price of natural gas to be produced from the KG basin, set to be auctioned next week, but has agreed to waive a marketing margin of $0.2 per mmBtu (metric million British thermal unit), according to tender documents. ONGC had last month called for bids for the sale of 2 mmscmd (million metric standard cubic meter per day) of gas from its KG-DWN 98/2 block.

Bidders had called for the reserve price to be lowered from the quoted price of 10.5 per cent of the three-month average of Brent crude prices, citing cheaper alternatives and high transportation costs for natural gas from the KG basin to users that are largely located closer to the west coast of the country which is a hub for LNG imports. Bidders had also sought the removal of $0.2 per mmBtu marketing margin that ONGC had quote in the initial tender documents for offer for sale of gas for three-five year terms.

“Change in reserve gas price is not agreed, however, considering requests from various bidders, levy of marketing margin of $0.2 per MMBtu over and above contract price is removed,” the firm said. Price of domestically produced natural gas is, however, regulated by the government and buyers would have to pay a maximum of $3.62 per mmBtu for gas purchased in first half of the fiscal and they may be wary of changes in the method by which prices are calculated in the future, said experts.

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