IGX eyes 5% of total spot LNG and domestic gas trade on its exchange

Since its launch in June 2020, some 2 million standard cubic meters a day (mscmd) of natural gas have been traded on the Gas Trading Platform; current demand in India is around 160 mscmd

The Indian Gas Exchange (IGX) will be looking to increase its share in the country’s natural gas trade. This may be done by allowing some domestically produced gas that is under the administered pricing regime, to be traded on the exchange.

Rajesh Kumar Mediratta, Director at IGX told Business Standard, “Volumes of gas traded on IGX platform are quite low as compared to India’s current demand, which is around 160 million standard cubic metres per day (mscmd). In the medium term, we expect to have few percentage points of the total gas market on exchange. We expect few market enablers, such as (inclusion of natural gas under) Goods and Services Tax, domestic gas sale on exchange, implementation of unified tariff among others to help us achieve that volume.”

“Our objectives will be to take a part of spot Liquefied Natural Gas and domestic gas. Spot Gas market in India is around 30 per cent of the total demand,” he added.

Since its launch in June 2020, around 2 million standard cubic meters of Natural Gas have been traded on the Gas Trading Platform. IGX started operations on June 15, 2020 as and has been operating as the Gas Exchange since December 10, 2020. The Exchange operates under the regulatory framework of Petroleum and Natural Gas Regulatory Board (PNGRB).

It offers contracts such as Day-Ahead, Daily, Weekdays, Weekly, Fortnightly and Monthly for buyers and sellers provide flexibility to participants to trade for a period from one day up to one month. But operations have been largely restricted with most domestically produced gas being sold at prices dictated by the government. IGX has been tapping small volumes of the spot market in territories currently serviced by pipeline networks.

 

Responding to how the domestic gas market can become truly market-linked, Mediratta said, “The Domestic gas prices are fixed as per formula and are not linked to current demand-supply situation or market linked. The Administered Price Mechanism (APM) is being updated biannually (current price is $ 1.79 per million British thermal units). To incentivise the domestic gas production in India, the pricing of APM gas should also be market linked. Domestic Gas may be allocated for exchange, Fertiliser Pooling may be moved to Exchange. Even the new gas from Reliance KG-D6 R cluster pricing freedom gas should be allowed to discover its price through exchange.”

Sharing his demand outlook, Mediratta said “Indian gas demand has increased at compounded annual growth rate (CAGR) of about 4-5 per cent and the Government has set a policy target of increasing the share of natural gas in India’s energy basket from current 6.5 per cent to 15 per cent by 2030.”

“The total demand can grow to 500 mscmd by 2030. The growing demand will be primarily catered by imported LNG. India’s LNG import increased at a CAGR of 12 per cent during fiscal 2015-2016 to fiscal 2019-2020.  In medium term we expect to have 5 per cent of the total gas market on exchange. We expect few market enablers, such as independent System Operator, domestic gas sale on exchange, rational transmission capacity access regulations, transparent capacity declaration among others to get robust price discovery and liquidity in the market,” he added.