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LNG terminal owners GAIL, Petronet join India’s first gas trading platform

Liquefied natural gas (LNG) terminal owners, state-run GAIL (India) Ltd and Petronet LNG Ltd (PLL) have joined India’ first natural gas exchange, that went online today, said Rajesh Kumar Mediratta, director, Indian Gas Exchange.

With others such as Manikaran Power, Torrent Power and Adani Gas onboard, the exchange will help in the revival of stranded gas fuelled power projects and reducing fertiliser prices and subsidy, Mediratta added.

The other members and clients of the exchange are; Geeta Power, GMR Group, Piramal Glass, Asahi Glass, Gujarat State Fertilizers & Chemicals Ltd, Gujarat Narmada Valley Fertilizers & Chemicals, Krishak Bharati Cooperative Ltd, Saint Gobain, Kajaria Ceramics, Bhagyanagar Gas, Maharashtra Natural Gas Ltd, Haryana City Gas and Gujarat Borosil, he said.

Set up by Indian Energy Exchange, the natural gas trading platform will also help towards discovering market price of gas on the exchange. India consumes around 145 million standard cubic meters a day (mmscmd) of gas.

“We as IEX desire to play in the overall energy basket of the country, which is beyond electricity. So, electricity is one and then gas is the other one and there could be many other similar players of energy baskets,” said Rajiv Srivastava, managing director and chief executive officer, IEX.

The National Democratic Alliance government has been pushing for a gas-based economy. Gas accounts for around 6.2% of India’s primary energy mix against the global average of 24%. The government plans to increase this to 15% by 2030. India’s gas demand is expected to be driven by fertilizer, power, city gas distribution and steel sectors.

“It seems like the most opportune time because there is a very strong push by the government to make India into a gas-based economy. From an energy perspective, gas in India is a very small fraction of the overall energy basket right now and they want to take it to at least close to 3X of that or two and a half, for the goals of next 8 to 10 years. And so if we can partner all the powers to be and all the authorities to be and all the prayers, if we can partner the entire ecosystem, there is a scope for huge amount of growth as well,” Srivastava said.

This comes in the backdrop of India reducing the domestic natural gas price to $2.39 per million British thermal units (mmBtu)—the lowest under the new domestic gas price regime, which was introduced in 2014. Also, the ceiling price for gas from difficult fields such as deep water, ultra deep water and high pressure-high temperature areas was reduced to $5.61 per mmBtu from the earlier price of $8.43 per mmBtu.

However, there are problems as well, given that gas is not under the Goods and Services Tax (GST) ambit, and inadequate gas pipeline infrastructure in the country with pipelines concentrated in the western and northern part of the country.

“I won’t worry too much about those things. Because those are, you know, the way and we’ve all done business in India all our lives. So we understand the manner in which these facilitations start to take place over time. Any industry you take, you will never have, at a starting point, at the point in which you take off, there is never going to be a 100% perfect condition and scenario. But somebody’s got to start. And that’s what we are doing exactly,” said Srivastava.

India, the biggest emitter of greenhouse gases after the US and China, plans to reduce its carbon emissions by 33-35% from its 2005 levels by 2030, as part of its commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in 2015.

The gas exchange is hopeful about its growth.

“We know that about 30% of the total consumption is through short term market and we hope to garner maybe initially start with 2-3 % of the total volume on the exchange and hopefully this pie will keep on increasing,” said Mediratta.

This comes in the backdrop of India — the world’s fourth-largest LNG importer — building up its LNG portfolio with Indian firms having inked long-term LNG contracts totalling 22 million metric tonnes per annum (mmtpa).

In October 2014, the National Democratic Alliance government announced a new gas pricing formula using the weighted averages of prices in the three major international gas trading hubs of US Henry Hub, the UK National Balancing Point and Japan’s custom-cleared rate.The government also wants to set up a gas trading hub.
Source: LiveMint

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