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Essar sells CBM gas to GAIL using Reliance formula

Press Trust of India  |  New Delhi 

has sold its entire production of or CBM from a block to state-owned Ltd using the same formula that used for pricing of its CBM.

will buy 2.3 million standard cubic metres per day of coal-bed (CBM) that and Gas Exploration and Production (EOGEPL) will produce from its Raniganj block in for USD 7.1 per million British thermal unit.

According to an evaluation of bid posted by Essar on its website, outbid Matix Fertilizers and Chemicals Ltd, Graphite Ltd and Positron Pvt Ltd to bag the supplies.

The price is more than double of the USD 2.89 per mmBtu price set by the government for most of the domestically produced conventional

Essar used the same formula which had first used in 2012 to seek bids for its CBM gas from its Sohgpur block in Madhya Pradesh, and then again last year for selling the CBM. In the first instance, the ministry had not approved the price.

Like RIL, Essar had sought bids for potential users in the form of a deductible from 12.67 per cent of Brent crude plus USD 0.52 per mmBtu plus USD 0.26 per mmBtu, according to the bid document.

GAIL bid a deductible of 1.89, which translated into a of USD 7.12 per mmBtu (on gross calorific value) at today's Brent of USD 64.80. At three-month Brent crude average of USD 65.8, the comes to USD 7.23 on gross calorific value (GCV) basis.

Interestingly, GAIL had in the similar bid process run by last year for 3 million standard cubic metres per day of Sohagpur CBM gas quoted a deductible of 3.495. had bid a deductible of 1.836 to win all the supplies.

RIL's Sohagpur gas at today's comes to USD 7.15 per mmBtu on GCV basis.

The formula used by and Essar is the same at which Petronet LNG, a joint venture of companies, whose is the oil secretary, used to import long-term liquefied (LNG) from

EOGEPL had invited bids from prospective buyers of gas based on a government notification dated April 11, 2017, which lays out a policy framework for the early monetisation of CBM gas.

The policy provided marketing and pricing freedom at arm's length price in the domestic market to contractors of CBM blocks.

EOGEPL has invested about Rs 4,000 crore in the Raniganj East CBM block in drilling wells, setting up supply infrastructure, and laying customer pipelines to Durgapur and nearby industrial areas, according to the company.

The block has 348 completed CBM wells, alongside robust gas and water handling capacity.

The Raniganj East block is India's most prolific CBM block, which has achieved of more than 1 mmscmd (million standard cubic metres per day), which will be gradually scaled up a saleable volume to 2.3 mmscmd.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 15 2018. 18:55 IST