India exchange to add more hubs as it begins trading local gas: interview
Indian Gas Exchange (IGX) plans to add more delivery hubs as it begins to trade locally produced gas, Rajesh Kumar Mediratta, CEO, IGX tells NGW.
“Now that we are able to trade domestic gas on the platform, we are required to increase the number of hubs too because domestic gas is produced in different parts of the country,” he said. “The major gas producing area is the KG basin and the second one is offshore fields. Other than that, coalbed methane is available in eastern part of the country. We need to add more hubs in these areas to ensure the platform is steady.”
IGX also aims to add more hubs based on the locations of LNG terminals namely Kochi and Ennore, which Mediratta believes, will become active with increased pipeline connectivity. “We are also planning to add Dhamra hub during this calendar year,” he added.
The exchange currently facilitates delivery-based trades in six different contracts such as day-ahead, daily, weekday, weekly, fortnightly and monthly at five different designated physical hubs - Dahej, Hazira, Dabhol, Jaigarh and KG Basin.
State-owned oil and gas company ONCG late May become the first company in India to trade domestically produced gas on IGX. ONGC traded 15,000mn Btu of gas at a ceiling price of 769 rupees/mn Btu at KG Basin delivery point. A total of 17 buyers participated that included city gas companies, glass manufacturers, petrochemical companies, power plants, and marketers.
The IGX in early May received approval from the Indian downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) to trade domestic gas on its platform. This approval is in line with the petroleum and natural gas ministry’s notification dated August 19, 2021, where domestic gas producers were authorised to sell up to 500mn m3 or 10% of annual production from the contract area, whichever is higher, per year through gas exchanges.
Only a part of India’s gas production can be sold freely at present while the rest is under an administered price regime. The biggest volume of such gas with marketing and pricing freedom comes from the Reliance-BP’s fields in the KG basin off India’s east coast.
Steadily growing volumes
IGX, which was launched in 2020, has seen steady growth in trade volumes. It traded a record 33,33,900mn Btu gas volume in March. IGX also delivered a record high volume of 27,20,500mn Btu in the same month. In May, the volumes grew 1241% year/year. Mediratta said this is because participants have begun to understand the value the platform brings.
“Since the launch of IGX in 2020, we have witnessed a steady growth in volumes on the exchange as more and more participants understand the value it brings and the benefits of trading through the platform. The buyers are appreciative of the transparency in the process which ultimately leads to competitive prices as compared to the international spot prices. Sellers too are witnessing and realising the value of facilitating trade via the exchange platform and ease in timely payments as the platform clears payments right after getting confirmation from the transporter,” he said.
Mediratta said that both buyers and sellers have witnessed equal value in trading through the exchange platform. “Initially, we observed that participants wanted to limit their trades to a small quantum, however as they progressed and developed trust in the functioning of the exchange, they started to bring in additional volumes.”
There are currently 26 members and nearly 45 active clients out of more than 500 registered clients. IGX has an ecosystem of nearly 60 gas market participants. Over the year, this number has more than doubled, Mediratta said.