India gets its first natural gas exchange; trading to begin at these hubs initially

By: |
June 14, 2020 4:31 PM

The exchange will be first such platform in the country for local market price discovery through demand-supply matching in a transparent way. Oil Minister Dharmendra Pradhan will launch the exchange on Monday.

One of IEX’s most important objectives of the exchange is also to maintain market integrity.

In an effort towards enabling gas market and fostering gas trading in the country, the government will be launching India’s own natural gas trading platform. Indian Gas Exchange (IGX) will be launched by Oil Minister Dharmendra Pradhan on Monday to begin with natural gas trading, PTI reported citing official sources. The exchange will be first such platform in the country for local market price discovery through demand-supply matching in a transparent way. Multiple buyers and sellers will trade in spot and forward contracts at designated physical hubs. The contracts traded will be for compulsory specific physical delivery while settlement of the trade will be subject to the condition that these contracts are non-transferable in nature and without any netting-off thereby.

One of its most important objectives of the exchange is also to maintain market integrity, sources said. To begin with, trading is proposed at the physical hubs at Hazira and Dahej in Gujarat and Oduru/Kakinada in Andhra Pradesh while new hubs would be introduced ahead, they added. IEX will seek time scheduled bids from buyers and sellers for price discovery. On this, a price discovery mechanism will operate to settle delivery of gas. The exchange will provide six market products — day-ahead, daily, weekly, weekdays, fortnightly and monthly.

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The national gas trading exchange was earlier proposed by the Petroleum and Natural Gas Regulatory Board (PNGRB) in 2018 and was likely to be functional by the end of 2018. As per draft National Energy Policy of Niti Aayog, $150 billion investment is required in energy sector annually until 2040, ministry of petroleum and natural gas had said in a statement in December 2018 agreeing to establish the exchange.

Few contracts will be available on June 15 – the first day of trading on IEX while few will be introduced later, sources said. The exchange has already conducted three mock trading sessions (March 20, April 9 and May 21) with significant participation from the industry. The bidding is done anonymously and hence, the buyer and seller do not know their counterpart. Moreover, the price discovery will happen through double-sided closed auction with uniform price mechanism or via continuous trade mechanisms.

For the national gas grid, the government had decided to give a grant of Rs 5176 crore (40 per cent of the estimated capital cost of Rs 12,940 Crore) to GAIL for development of a 2655 Km long Jagdishpur-Haldia/Bokaro-Dhamra Gas Pipeline (JHBDPL) project. The pipeline, said Dharmendra Pradhan in a written reply to the Lok Sabha in December 2018, will carry natural gas to the industrial, commercial, domestic and transport sectors in Bihar, Jharkhand, Odisha, West Bengal and Uttar Pradesh.

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