The Indian Gas Exchange (IGX) achieved a record trading of 10.3 million British thermal units (mBtu) gas volumes in October, as the platform detected lower than spot prices for Asian liquefied natural gas (LNG). Most of the trading was done through monthly contracts, which recorded deals worth 9.4 million Btu in October. The monthly trade volume in October was more than 7.7 thousand metric tons of gas traded in the first six months of the current fiscal year.
The average monthly spot market spot market price discovered in October was $27.6/MMBtu, while Asian spot LNG prices ranged between $30-35/MMBtu throughout the month.
“Better price discovery from global spot markets has attracted buyers to the exchange, and now we have many new buyers and sellers in IGX,” Rajesh Kumar Mederata, managing director and CEO of IGX, told FE. “Some LNG marketing companies, which traditionally sell directly to customers, purchased gas through IGX in October,” Mederata stated, adding that “gas operators are now beginning to use IGX to manage their imbalances through shorter contracts.”
Industry experts noted that the Union’s Ministry of Oil and Natural Gas’s decision in August to allow domestic gas producers (with freedom to market) to sell 10% of their annual production through gas exchange may also have contributed to increased trade volumes at IGX. The decision paved the way for Reliance Industries (RIL) and BP to sell a portion of production from the very deep water field in the KG-D6 Block at IGX. The Oil and Natural Gas Corporation Ltd (ONGC) may also sell some gas in the exchange from the deep water U1B gas located in the KG-DWN 98/2 complex.
The country’s first gas trading platform was launched in June 2020 to provide more flexibility to users by providing them with more options to reserve fuel on short-term contracts. Although more than 80% of imports are made under long-term contracts at pre-determined prices, a significant portion of buyers are vulnerable to the recorded rise in global spot prices.
As FE recently reported, industry divisions that use natural gas as a fuel or feedstock and city gas marketing companies bear the brunt of the standard spot market rates for LNG in global markets. In the first six months of FY22, 15,678 million standard cubic meters of LNG were imported to meet 49% of domestic demand.
The demand for natural gas in the domestic market has traditionally been dependent on fertilizers, city gas distribution entities, power, refineries and petrochemical industries. The impact of higher LNG prices is being felt disproportionately among users depending on factors such as access to cheaper domestic gas and government subsidies.