Oil and Natural Gas Corporation Limited (NSEI:ONGC) is seeking to sell gas from its block in the KG basin at a crude-linked reserve price, which would be around $15 per mmBtu at current oil prices. ONGC has sought bids for 0.75 million metric standard cubic meters a day (mmscmd) of gas it plans to supply from its KGDWN-98/2 block off the eastern coast. The supply will tentatively start from October 1, 2022, and the period for which the gas is being auctioned is one year.

The bidders can quote a minimum of 10,000 standard cubic meters per day. The reserve price has been set at 14% of the Dated Brent plus a premium of $1 per mmBtu. At the current Brent price of $100 per barrel, the reserve price comes to $15 per mmBtu.

The bidders will have to quote higher than the reserve price. The actual sale price will be the lower of the quoted price and the government-set ceiling price for gas from difficult fields such as ONGC's KG block. The current ceiling is $9.92 per mmBtu but is likely to sharply rise in October when the government revises it next.

The ceiling is revised every six months and is linked to international rates of liquefied natural gas and other alternative fuels, which have soared in 2021.