Vedanta Ltd, owned by billionaire Anil Agarwal, is seeking a minimum price of USD 19 for natural gas produced from a field off Gujarat in order to cash in on the recent surge in global energy prices. As part of its tender document, Vedanta is seeking bids for the sale of 0.25 million standard cubic meters per day of gas produced from CB/OS-2 block located in Surat district of Gujarat.
In order to receive Liquefied Natural Gas (LNG) shipments, bids were solicited based on the average monthly price of Brent crude oil and Platts’ West India Marker (WIM).
The tender document specifies that the sale price will be the lower of Platts LNG WIM + 1.0 or a premium over Brent crude oil prices, which averaged 16.67 per cent.
At the current trading price of USD 117.68 per barrel for Brent crude oil, the floor price comes to USD 19.6 per million British thermal units. To this, buyers will have to bid a premium.
As of March 21, the price of Platts WIM was USD 32.275 per mmBtu (Metric Million British Thermal Unit), and if it were to be used as a benchmark, it would be USD 33.275.
“The sales gas price on a monthly basis shall be calculated as lower of Platts LNG WIM + 1.0 (or) 16.67 per cent of Average Brent Price + P,” it said adding ‘P’ shall be quoted by bidders in USD per mmBtu.
There will however be a floor price that is not below the government-administered price for gas, which currently stands at USD 2.9 per mmBtu.
While Vedanta holds 40 per cent interest in the CB-OS/2 block, the state-owned Oil and Natural Gas Corporation (ONGC) has 40 per cent. The balance 10 per cent is held by Tata Ptrodyne Ltd.
Vedanta is seeking buyers to purchase 0.25 mmscmd of gas for a 14-month period starting in May 2022.
In the past couple of months, energy prices have been on the rise as a result of two factors: demand returning after the pandemic and supply disruptions after the Russia-Ukraine crisis.
While crude oil prices soared to a 14-year high of USD 140 per barrel earlier this month, spot or current market prices for liquefied natural gas (LNG) in Asia hit a record high of more than USD 59.672 per mmBtu.
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