InvestorQ : What is the price that Reliance Industries and BP will get for the gas that they pump from the KG-D6 basin off the Andhra Coast?
sara Kunju made post

What is the price that Reliance Industries and BP will get for the gas that they pump from the KG-D6 basin off the Andhra Coast?

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Mary Joseph answered.
7 months ago
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Reliance Industries and BP will get only $4.06 per mmBtu for the new gas they started to produce from the KG-D6 field. This is the government dictated price although the discovered price in an open auction is much higher. Even though there is pricing freedom, RIL and BP cannot sell gas at a rate higher than the government notified cap.

Reliance got an average price realization of 4.205 per mmBtu for gas from the D1 and D3 fields prior to April 2019. They would have got double the price if the BJP government had accepted the Rangarajan formula. However, the government fixed the price based on the formula used by gas surplus nations like the US and Russia, which could be flawed.

In 2016, the government had allowed a higher price for any new gas produced from a difficult project such as the deep sea field. The current cluster falls in that definition and gas from it was free to be sold but subject to the price cap. The price cap of $4.06 is sharply down from the price cap of9 $5.61 in the previous 6 months, in line with crude fall.

The floor price for bids is fixed at 8.4% of dated Brent Crude price and potential buyers had to bid at the rate or higher to secure gas supplies. It remains to be seen if producers of gas find it viable to sell gas at these prices.

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