Ball set rolling for gas trading hub

The country has moved a step closer to setting up a natural gas trading hub which would help in a better price discovery for domestic as well as imported gas.

By R. Suryamurthy
  • Published 9.04.18
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New Delhi: The country has moved a step closer to setting up a natural gas trading hub which would help in a better price discovery for domestic as well as imported gas.

India also aims to become Asia's pricing hub by competing with Singapore, Shanghai or Tokyo.

The trading exchange, or a hub, will enable a better price discovery and be on the lines of the existing online platforms in the country that trade in power. It will be similar to global hubs such as Henry Hub of the US and National Balancing Point of the UK.

The Petroleum and Natural Gas Regulatory Board has called for bids to hire consultants for the "regulatory framework to develop and operationalise a gas trading hub/exchange (GTHE) in India".

The regulator said the government has envisaged a higher share of natural gas in the primary energy mix from the current level of about 6 per cent to 15 per cent by 2030.

Accordingly, the ministry of petroleum & natural gas has focussed on increasing the availability of natural gas by enhancing domestic production, encouraging the import of liquefied natural gas (LNG), completing the national gas grid (NGG) pipeline and the speedy rollout of the city distribution network.

To further boost the consumption of natural gas, the government is considering a trading hub where natural gas can be traded and supplied through a market-based mechanism instead of multiple formula-driven prices.

The regulator said the consultant would be chosen on a two-bid system of technical and financial bids. A pre-bid conference will be held on April 9 and the bidding will close on April 16.

The consultant will have to study existing models and frame one for the country, including a regulatory mechanism, within 18 weeks from the date of award of the work order, the bid document said.

Officials said both imported natural gas (liquefied natural gas or LNG) and gas produced domestically will be traded at the hub. This will help to determine the market price of natural gas in the country.

India, the world's fourth-biggest importer of liquefied natural gas (LNG), does not have a free market regime for gas. Natural gas is sold on the basis of a government-mandated formula that links the local price to international rates, while most long-term import contracts are linked to crude oil.