(Bloomberg) -- Billionaire Mukesh Ambani-owned Reliance Industries Ltd. has become the first buyer of coal-bed methane produced from its own block in central India after agreeing to pay the highest price for the fuel, according to the company's website.
The company bid $4.23 per million British thermal units, outbidding others such as urea maker Deepak Fertilisers & Petrochemicals Corp. and state-run utility GAIL India Ltd., according to a document on the website. Reliance will use the entire initial daily volume of 400,000 cubic meters of gas from coal seams at the Sohagpur block in Madhya Pradesh state at three of its petrochemical plants.
Reliance's sale to itself is the first test of the marketing and pricing freedom India introduced in March for coal-bed methane producers to attract investments and boost production. The price, which is 71 percent higher than the $2.48 per million Btu price of natural gas from conventional fields in the country, will help boost Reliance's oil and gas margins. It will also partially replace the costlier imported gas used at the petrochemical plants in the western Indian states of Maharashtra and Gujarat.
Reliance's price was higher than the $4.159 a unit bid by Deepak Fertilizers and $4.009 by GAIL. Electricity generators GMR Rajahmundry Energy Ltd. and GMR Vemagiri Power Generation Ltd., which quoted a price of $2.48 each, were the remaining qualified bidders.
The bidding process was carried out by Crisil Risk and Infrastructure Solutions Ltd., a unit of Crisil Ltd. Reliance spokesman Tushar Pania couldn't immediately comment.
Reliance, which became the third producer of gas from coal seams after Great Eastern Energy Corp. and Essar Oil Ltd., started commercial production in March from the block, known officially as SP(West)–CBM–2001/1.
It said last month it plans to increase coal bed methane output to 2.5 million cubic meters a day by March 2018. Production will increase in the next 15-18 months as the company plans to drill 600-800 more wells and expand infrastructure in the next phases of development, according to a statement on Reliance's website.
To contact the reporters on this story: Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net, Saket Sundria in Mumbai at ssundria@bloomberg.net.
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Alpana Sarma, Abhay Singh
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