Reliance, BP commit to pay for any shortfall in KG-D6 production to buyers

0
116

Reliance Industries Ltd and its partner BP Plc of UK have committed to pay in cash for any natural gas volumes they are unable to deliver to customers from the next wave of discoveries in the eastern offshore KG-D6 block.

According to draft gas sales and purchase agreement (GSPA) Reliance and BP have shared along with price discovery bids for incremental gas from the R-Cluster fields in KG-D6 block, the sellers will reimburse buyer money equivalent to gas sourced from alternate source to make up for any volumes they are unable to deliver.

The buyer on his part will be obliged to offtake the committed gas volumes or pay for it (take or pay).

The volumes not taken but paid for can be taken in subsequent quarters, the GSPA said.

These ship or pay and take or pay obligations will be waived in the event of force majeure events such as any act of God like earthquake and floods, fire, epidemic, acts of war, strike and lockouts, delays due to government/ regulatory actions and court orders.

Also, “loss, failure, impediment, restriction in output or deliverability of reservoirs in the gas fields” will be a force majeure event, it said.

Reliance had a decade back signed up to sell 60 million standard cubic metres per day of gas from the first set of gas fields in the KG-D6 block, but the output rapidly declined due to reservoir issues, leaving users such as power plants stranded.

The company had not reimbursed buyers for the shortfall, calling it an act beyond its control. The government had, however, levied penalties on it for failure to produce the committed volumes – an act that the company has challenged through an arbitration. The outcome of the arbitration is pending.

READ  SII fully refunds South Africa for 500,000 undelivered COVID-19 vaccine doses

While those initial fields have ceased to produce, Reliance-BP last month started output from the R-Cluster fields.

They in November 2019 sold the first 5 mmscmd from the R-Cluster field at a rate benchmarked against Brent crude oil, the duo has now invited bids for selling incremental 7.5 mmscmd of incremental output that is likely to be available from February benchmarked to a gas index, according to a notice inviting offers.

Reliance and BP have sought rates equivalent to JKM or Japan/Korea Liquefied Natural Gas Import Price.