Govt to launch gas trad­ing hub by Oct

Financial Chronicle - - PLAN, POLICY -

THE gov­ern­ment plans to launch a nat­u­ral gas trad­ing hub by Oc­to­ber, cre­at­ing an In­dian gas bench­mark, which will spark a surge in con­sump­tion of the cleaner-burn­ing fuel.

Oil reg­u­la­tor PNGRB has sought bids to hire a con­sul­tant to help de­velop a reg­u­la­tory frame­work for op­er­a­tional­is­ing the gas trad­ing/ex­change hub.

“In or­der to fur­ther boost the con­sump­tion of nat­u­ral gas in the coun­try, the gov­ern­ment is con­sid­er­ing the es­tab­lish­ment of a gas trad­ing hub/ex­change (GTHE), where nat­u­ral gas can be traded, and sup­plied through a mar­ket-based mech­a­nism in­stead of mul­ti­ple for­mula driven prices,” the petroleum and nat­u­ral gas reg­u­la­tory board (PNGRB) said in the ten­der floated for hir­ing the con­sul­tant.

Cur­rently, the gov­ern­ment fixes the price of the bulk of do­mes­ti­cally pro­duced nat­u­ral gas. The rate, ar­rived at us­ing price preva­lent in gas-sur­plus na­tions of the US, Canada, the UK and Rus­sia, is $3.06 per mil­lion Bri­tish ther­mal unit for six­month pe­riod be­gin­ning April 1.

In com­par­i­son, the cost of im­ported LNG into In­dia is around $7.5. “The gov­ern­ment has en­vis­aged ush­er­ing into a gas-based econ­omy by in­creas­ing the share of nat­u­ral gas in the pri­mary en­ergy mix of the coun­try from cur­rent 6 per cent to 15 per cent by 2030,” PNGRB said.

For this, the thrust is on in­creas­ing the avail­abil­ity of nat­u­ral gas by en­hanc­ing the do­mes­tic pro­duc­tion, en­cour­ag­ing the im­port of liq­ue­fied nat­u­ral gas (LNG), com­ple­tion of na­tional pipe­line grid and speed­ier roll out of the city gas dis­tri­bu­tion net­work in the coun­try.

PNGRB said the oil min­istry has asked it to ini­ti­ate steps for fram­ing of nec­es­sary reg­u­la­tory frame­work to en­able the es­tab­lish­ment and oper­a­tion of a GTHE.

The reg­u­la­tor said it wants to hire a con­sul­tancy firm to pro­vide as­sis­tance in car­ry­ing out a de­tailed study on var­i­ous pre-req­ui­sites. PNGRB would visit the US, the UK and Aus­tralia, where the gas-trad­ing hub is suc­cess­fully op­er­at­ing, to de­cide if there is a need to amend ex­ist­ing reg­u­la­tions.

The tar­get for launch of the gas-trad­ing hub has been set for Oc­to­ber. A hub is used as a cen­tral pric­ing point for a net­work that could aid bet­ter price dis­cov­ery for do­mes­tic as well as im­ported gas.

It is not clear if the gov­ern­ment would aban­don fix­ing the gas price and al­low the rates to be dis­cov­ered on the hub.

In­dia is not only coun­try launch­ing trad­ing hub. China plans to launch a nat­u­ral gas trad­ing hub in Chongqing this year.

The world’s big­gest nat­u­ral gas hub is the Henry Hub in the US state of Louisiana. Gas de­liv­ered at this point is the ba­sis of most US nat­u­ral gas fu­tures. Aid­ing Henry Hub is vast do­mes­tic pro­duc­tion and con­sump­tion as well as the world’s big­gest and most freely ac­ces­si­ble pipe­line net­work, which stretches into Canada and Mex­ico. Britain has Na­tional Bal­anc­ing Point (NBP) as the main gas hub.

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