Contention upheld in arbitration award in Rajasthan block case: Vedanta

livemint.com:

Vedanta Ltd was seeking a minimum of $9.5 for the natural gas it produces from its Rajasthan block, according to a tender floated by the firm for the sale of the fuel. Vedanta sought bids from users for 0.6 million standard cubic meters per day of gas it plans to produce from the RJ-ON-90/1 block in the Barmer basin of Rajasthan in three months beginning October 1. Gas extracted from below ground is used to produce electricity, make fertilizer, turned into CNG to fire automobiles, or piped to household kitchens for cooking purposes.

In the tender, Vedanta asked users to quote a variable 'P' that they are willing to pay over and above 14.5 per cent of Brent crude oil price. At the current Brent price of USD 84 per barrel, the base comes at USD 12.18 (14.5 per cent of USD 84). Users have to quote a 'P' over and above this price.

Gas price will be calculated as lower of Platts LNG WIM (the price of liquefied natural gas delivered on India's west coast) and 14.50 per cent of Brent Price P, it said. "Notwithstanding the value calculated (through the formula), the Sales gas price for any month shall not be lower than USD 9.5 per million British thermal unit," the tender said. The price being sought by Vedanta is almost 50 per cent premium over the ceiling price of USD 6.5 per mmBtu paid to state-owned producers like ONGC for output from legacy or old fields.

E-bidding is planned for September 8. Block RJ-ON-90/1 Block, where a subsidiary of Vedanta holds 70 per cent stake, is predominantly an oil production block but it also has some gas resources. State-owned Oil and Natural Gas Corporation (ONGC) holds the remaining 30 per cent interest in the block.