State-owned Oil and Natural Gas Corporation is seeking a premium over the government gas price for the gas it plans to produce from coal seams in Jharkhand.
ONGC has sought bids from users for sale of 0.05 million standard cubic metres per day of gas from the North Karanpura coal-bed methane block for three years.
Users have been asked to quote a premium they are willing to pay over and above the monthly domestic natural gas price that the Oil Ministry's Petroleum Planning and Analysis Cell notifies, the tender document showed.
PPAC every month declares a price for the majority of domestically produced natural gas. This price is 10% of the monthly average of the basket of crude oil that India imports. For the month of January, this price comes to $7.82 per million British thermal unit.
This price in the ONGC tender has been marked as reserve gas price.
While the government sets price for two-thirds of the gas produced in the country, CBM gas enjoys pricing freedom where sellers are allowed to discover market rate.
Gas extracted from below ground is used to produce electricity, make fertilisers or turned into CNG for sale to automobiles and piped to household kitchens for cooking purposes.
"Bidders are required to quote 'P', which would be a positive non-zero premium over the Reserve Gas Price," the ONGC tender document said.
The e-auction will take place on Feb. 7.
The horse-shoe shaped North Karanpura CBM Block falls in the district of Hazaribagh and Chatra of Jharkhand state. The North Karanpura block encompasses an area of 340 square kilometers with envisaged CBM resources of about 62 billion cubic metres.
ONGC is the operator of the block with 55% interest. Indian Oil Corp. holds 20% and the balance 25% is held by Prabha Energy Pvt. Ltd.
"ONGC on behalf of consortium has launched this e-tender for sale of 0.05 mmscmd CBM gas on 'as is where is' and fall-back basis," the tender said.
The term for sale will be three years, which can be extended by a maximum of 2 years, it added.
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