Vedanta seeks a minimum of $9.5 per mmBtu for gas from its Rajasthan block

In the tender, Vedanta asked users to quote a variable 'P' that they are willing to pay over and above 14.5% of Brent crude oil price

Billionaire Anil Agarwal's Vedanta Ltd is seeking a minimum of USD 9.5 for the natural gas it produces from its Rajasthan block, according to a tender floated by the firm for the sale of the fuel.

Vedanta sought bids from users for 0.6 million standard cubic meters per day of gas it plans to produce from the RJ-ON-90/1 block in the Barmer basin of Rajasthan in three months beginning October 1.

Gas extracted from below ground is used to produce electricity, make fertilizer, turned into CNG to fire automobiles, or piped to household kitchens for cooking purposes.

In the tender, Vedanta asked users to quote a variable 'P' that they are willing to pay over and above 14.5 per cent of Brent crude oil price.

At the current Brent price of USD 84 per barrel, the base comes at USD 12.18 (14.5 per cent of USD 84). Users have to quote a 'P' over and above this price.

Gas price will be calculated as lower of Platts LNG WIM (the price of liquefied natural gas delivered on India's west coast) and 14.50 per cent of Brent Price + P, it said.

"Notwithstanding the value calculated (through the formula), the Sales gas price for any month shall not be lower than USD 9.5 per million British thermal unit," the tender said.

The price being sought by Vedanta is almost 50 per cent premium over the ceiling price of USD 6.5 per mmBtu paid to state-owned producers like ONGC for output from legacy or old fields.

E-bidding is planned for September 8.

Block RJ-ON-90/1 Block, where a subsidiary of Vedanta holds 70 per cent stake, is predominantly an oil production block but it also has some gas resources. State-owned Oil and Natural Gas Corporation (ONGC) holds the remaining 30 per cent interest in the block.

Vedanta in the tender document said it has developed the Raageshwari gas terminal to process and deliver natural gas produced from the RJ block at Barmer. RGT is connected by the Barmer-Pali pipeline (Mehsana-Bhatinda Pipeline) of GSPL India Gasnet Limited.

"In line with the 'Natural Gas Marketing Reforms' notification published by the Ministry of Petroleum and Natural Gas (MoPNG) on October 15, 2020, and detailed guidelines issued on December 3, 2020, as 'Discovery of Market Price for Domestically Produced Natural Gas through e-Bidding' notification, Vedanta has issued a request for proposal (RFP) and invited offers from interested companies to offtake all or a portion of gas available for sale from the gas field," the document said.