Reliance Industries (RIL) said it was striving to complete its KG-D6 projects in time. “KG-D6 projects are currently on track. Covid-19 situation has impacted our normal functioning and all efforts are being made for timely completion of the KG-D6,” a company spokesman said in response to an ET query.
In November, the joint venture of RIL and BP Plc had auctioned its planned output of 5 million metric standard cubic meters a day (mmscmd) of gas from R-cluster field in its KG-D6 block.
Customers were told that supply would begin between May 15 and November 10. By April 1, the supplier was supposed to give buyers a 45-day window in which output would start. No such notice was given to customers, one of the buyers said.
It instead wrote to customers, saying the Covid-19 pandemic was preventing it from presenting the second time slot but it would do so shortly, people familiar with the matter said. “It’s for sure now that RIL-BP can’t start supplying from mid-May and it’s possible that the supply is delayed by many months given the demand and price uncertainties the pandemic has caused,” he said.
The supply pact requires that after telling customers about the 45-day window for starting production, the date of commencement would be narrowed to a third window of 30 days, followed by the date of supply.
These time windows are part of supply contracts to help both sellers and buyers prepare for the transaction. Gas buyers need to book pipeline capacity and make arrangement for receiving gas.
The pandemic has brought in another big challenge for RIL-BP: the price collapse. In November when the planned output from R-Cluster was auctioned to a variety of customers for 2-6 years, the crude price was around $63 a barrel. Gas prices discovered in the auction were 8.4%-8.6% of the dated Brent. This meant gas prices of $5.29 to $5.41 per mmBtu at $63 a barrel of oil. With crude prices collapsing to $20 now, the gas price would vary between $1.68 and $1.72 per mmBtu, lower than even the domestic formula gas price of $2.39. This drop is illustrative and actual prices will vary during the period of supply as the dated Brent is defined as the average of published Brent prices for three calendar months immediately preceding the relevant contract months in which gas supply is made.
