Discovery of Market Price for Natural Gas Through E-Bidding

The Ministry of Petroleum and Natural Gas has announced the initiation of e-bidding for the discovery of market prices for domestically produced natural gas. This notification forms a part of the “Natural Gas Marketing Reforms” introduced earlier. It aims towards transparency and market-driven pricing. This notification was published on December 18, 2023.

The key aspects of the process, as specified in the notification, are as follows:

1. Procedure for E-Bidding: The process document establishes the procedure for the sale of domestically produced natural gas by a contractor through e-bidding, adhering to the provisions of the contract and the Gazette Notification on Natural Gas Marketing Reforms.
2. Independent Agency Engagement: Contractors are required to engage an independent agency from those empaneled by the Directorate General of Hydrocarbons (DGH).
3. Tender/Bid Design: Contractors are tasked with designing the tender/bid offer, including eligibility criteria, bid parameters, evaluation criteria, tender fee, Gas Sales Agreement terms, and any other relevant information to encourage wider participation, promote competition, and maximize the value of offered natural gas.
4. Bidding Timeline: A minimum of 21 days’ clear time from the date of hosting the e-bidding link on the DGH website must be provided for the submission of bids. Contractors must ensure timely responses to all queries and clarifications raised by bidders.
5. Bids Invitation: Contractors are responsible for inviting bids from prospective buyers of natural gas through widely publicized e-bidding portals, national and local newspapers, DGH website, constituents of the contractor, and various other platforms, including social media.
6. Bid Closure Report: Upon completion of the bidding process, the contractor submits a bid closure report to DGH, detailing participants, qualified bidders, selected bidders with their prices and allocated quantities. Additionally, all executed Gas Sales Agreements (GSAs) between the contractor and buyers are submitted to DGH.
7. Payment Responsibility: Contractors are obligated to make payments of all fees and charges to the selected agency conducting the e-bidding process through a separate arrangement between the contractor and the selected empaneled agency.
8. Government Intervention: The entire proceeding will be conducted by the contractor/producer without the need for government approval. However, the government retains the right to ask for information and intervene in case of suspected foul play.
9. National Oil Companies Compliance: National Oil Companies such as ONGC and OIL are required to follow these guidelines for discovering the market price of natural gas produced from their Nomination fields wherever pricing and marketing freedom has been granted.
10. Decision Authority: DGH will decide all issues related to the empanelment of agencies for the bidding process, while issues concerning the clarification on the policy of Gas Sale shall be decided by the Government.
11. Existing Gas Sales Agreements: Existing gas sales agreements will continue until the duration of the agreements/contracts, and subsequent gas sales will be subject to the newly introduced guidelines. All contractors must provide copies of their existing gas sales agreements to DGH.

This move towards a market-driven approach is expected to bring more efficiency, competition, and transparency to the natural gas sector, fostering a dynamic and competitive market environment.