India’s leading power trading platform Indian Energy Exchange (IEX) launched its natural gas trading platform last week.
Called the Indian Gas Exchange (IGX), it is now looking for trader members and gas buyers. This even as the Petroleum and Natural Gas Regulatory Board (PNGRB) is yet to come out with guidelines for gas trading.
IGX would offer spot and forward contracts at Dahej, Hazira and Kakinada. While Petronet LNG Ltd (PLL) operates an LNG terminal at Dahej, Shell operates another one at Hazira. Kakinada is the landfall point for natural gas being produced from the Krishna Godavari basin.
IGX will be offering a spot contract for the day ahead market, which means gas will be physically delivered the next day. The forward contract is for daily, weekly, monthly and fortnightly markets.
Currently, LNG is not regulated both in terms of supply contracts and pricing while domestic gas prices are notified by the government. Supply contracts for gas produced by government-owned companies are dictated by government norms.
IEX, which has 90 per cent share in day-ahead power trading, is planning an initial investment of Rs 10 crore for IGX over the next five years.
Senior executives said this was planned keeping in mind the growth potential of the gas market. “Gas market in India is poised for a break outgrowth of 2.5 times, from 166 to 380 MMSCMD by 2030. With conducive policies, the share of natural gas in India’s energy basket could double to 15 per cent,” said a company executive.
While the current government has been vocal about having a gas trading hub for the past three years, regulations are yet to be framed.
PNGRB is yet to take a call on IEX’s plans. A PNGRB official indicated that they were in the process of coming up with regulations on the gas hub and gas trading guidelines will take shape only later.
GAIL and Oil and Natural Gas Corporation (ONGC) were expected to take equity in the planned gas exchange, which would have helped create a natural gas trading hub.
In April 2018, KPMG came out with an initial report submitted to the PNGRB for the creation of a gas hub in India.
A GAIL official said the company was not against the IEX move so far. “It is a free world. But one has to see the legal validity of such an institution as the regulations by PNGRB are yet not out,” said a GAIL official.
The government needs to take a call on whether gas produced out of domestic fields allotted on nomination basis and currently given on priority to notified sectors will be traded.
In a presentation to investors, IGX said an exchange would help in increasing volumes and infrastructure utilization of terminals and pipelines.
“Even small industries can use the exchange to procure gas at competitive prices. This will also help in revival of gas-based power plants. Exchange can provide gas at competitive rates for grid balancing purpose in upcoming high renewable energy scenario,” said the presentation. Peak power from gas and hydro is needed to balance the power grid with a rising share of intermittent renewable.
IGX is also looking at the fertiliser industry and city gas distributors as buyers on their platform.
