Gujarat Petronet keen on joint gas trading platform

Gujarat State Petronet Limited (GSPL), a subsidiary of the Gujarat State Petroleum Corporation (GSPC) has approached commodity bourses Multi Commodity Exchange (MCX), the National Multi Commodity Exchange (NMCE) and the National Board of Trade (NBOT) for the joint development of a platform for streamlined trading in natural gas.

National Commodities and Derivatives Exchange of India (NCDEX) and GSPL already have a memorandum of understanding signed in May 2004 in this regard.

The project was expected to go on stream by September 2004 but has been stalled by some last minute glitches.

Jignesh Shah, managing director of MCX, confirmed that the exchange has been approached.

"MCX has been invited to make a proposal by the third week of January and after verifying all parameters and commercials, the approved parties would be called to partner the project with GSPL," he said.

Under the arrangement, GSPL and other gas pipelines would act as neutral warehouses of gas in the trading scheme.

Major activities like trading, clearing and risk management services would be undertaken separately by the various exchanges.

GSPL was evaluating the exchanges to help it prioritise, upgrade and realign its pipeline's automation systems to facilitate trade.

GSPC, the parent company, would be one among the 25-odd gas traders in the Gujarat region.

GSPL supplied gas worth a minimum of Rs 2 crore daily to customers like Essar, Gujarat Narmada Valley Fertiliser Company, Indian Petrochemicals Corporation Limited, Narmada Chemataur Petrochemicals, Videocon Narmada, Kribhco, Gujarat Industrial Power Company Limited and Gujarat State Fertiliser and Chemical Company.

The Gujarat Gas Company, Gas Authority of India and Gas Transmission Infrastructure were expected to participate in the venture at a later stage.

Customers would be in a position to initiate price discovery by selling or buying gas on a spot basis through the exchange platforms.

This would be followed by the introduction of "gas futures contracts" akin to spot markets.

GSPL was currently developing about 2500km of transmission pipeline at a cost of about Rs 5000 crore, which would be completed by 2007.

About 430km of the pipeline was already operational and another 400km would become operational this year.

This would permit delivery based trading, beginning in Gujarat, and later along the national gas grid after it was developed.