India Will Soon Have Its First Natural Gas Trading Exchange

16 October  2017

India will soon have a natural gas trading platform, which could lead to market-determined pricing of gas.

The Ministry of Petroleum and Natural Gas is set to approach the Cabinet to set up a gas exchange in an effort to move towards market-driven pricing and pool domestic natural gas with imported liquefied natural gas (LNG), Petroleum Minister Dharmendra Pradhan told reporters at the India Energy Forum in New Delhi on Tuesday.

Dharmendra Pradhan, Oil Minister said The gas exchange is in the interest of the Indian consumer. The world average of gas consumption is 24 percent, Gujarat’s gas consumption is 26 percent and India’s gas consumption is 6-7 percent. In future, we see a lot of marketing scope in gas for electricity, fetilizer and steel industry.

Currently, natural gas in India is sold on the basis of a government-mandated formula that links the local price to rates prevailing in gas-surplus nations. In comparison, most long-term contracts for import of gas are linked to oil.

The absence of market determined prices have been a big disincentive for companies to invest in gas exploration and production. “The administered price mechanism will be there as there are priority sectors for gas consumption. But gradually India will move towards a transparent pricing mechanism,” Pradhan said.

The trading platform can eventually phase out the gas pricing formula, he added.

The petroleum ministry will also form an internal think-tank to build gas infrastructure in India with an eye on Prime Minister Narendra Modi’s target of reducing oil imports by 10 percent by 2022.

The think-tank would come up with suggestions on bringing down India’s energy imports by 10 per cent, setting up the gas infrastructure, and foreign direct investment and technology for the oil and gas sector.

According to the International Energy Agency, natural gas demand in India to grow, on average, 6 percent per year to around 80 billion cubic metres by 2022.

SOURCE: Bloomberg Quint