Reliance Industries Ltd and its partner BP plc of the UK have sought bids for the sale of natural gas from the eastern offshore KG-D6 block at a price linked to the rate at which LNG is delivered to Japan and Korea.

The two partners invited bids for the sale of 6 million standard cubic meters per day of gas starting February 2023, according to the tender document.

Users such as city gas operators that convert gas into CNG for the sale to automobiles and pipe it to household kitchens or power plants that use it to generate electricity or fertiliser units that use it to make urea, have been asked to quote premium they are willing to pay over the JKM price.

JKM is the Northeast Asian spot price index for LNG delivered ex ship to Japan and Korea. JKM price for February is $28.83 per million British thermal unit (mBtu).

Bidders have been asked to quote variable “V” in the gas price formula “JKM + V”.

The starting bid for “V” has been set at $ (minus) 0.30 per mBtu. “Each bidder is required to enter bids that are higher than or equal to the starting” bid quote, the tender document said.

The maximum valid bid for“V” shall be $5.01 per mBtu beyond which the bid shall not be accepted by the e-bidding portal, it said.

The gas price, it said, shall be higher of the government-set ceiling price for gas produced from deepsea fields or the lower of price arrived at the bidding and the ceiling price.

In May last year, Reliance-BP had auctioned 5.5mscmd of incremental gas from the newer discoveries in the KG-D6 block, benchmarking it to the same JKM gas marker. Three-fourths of that volume was picked up by Reliance and its affiliates.

Sources said that there was no restriction on the sale of gas to private parties from deepsea fields. They, however, added that the Centre has only set a price ceiling where the cap is $12.46 per mbtu from October 1, 2022 to March 3, 2023.