IGX seeks approval for trading of trucked LNG, multi month contracts

Domestic gas consumption has risen 13 percent in first 10-months of 2023

The Indian Gas Exchange (IGX) has sought regulatory approval to begin trading of Liquefied Natural Gas (LNG) from Regasified LNG terminals and distributed fields in small scale LNG (ssLNG) containers. The niche business is expected to see major growth in coming years, and an application has been filed with the Petroleum and Natural Gas Regulatory Board (PNGRB), IGX CEO Rajesh Mediratta told reporters on Wednesday.

ssLNG contracts are set to benefit buyers who are situated in areas not yet covered by the national gas grid. As of FY23, approximately 0.7 Million Metric Standard Cubic Meters per Day (MMSCMD) of LNG is transported by road in India, constituting around 0.4 percent of the total natural gas consumption. This is expected to grow to 5 MMSCMD over the next five years, the company said.

IGX has suggested it can launch the service at LNG terminals at Dahej, Dabhol, Hazira, Kochi, and Ennore to begin with. The company also has plans to initiate cross-border sourcing of natural gas by Bangladesh through the company's eastern hub at Dhamra port, the only LNG terminal in the Eastern Region.

The company has also sought approvals to begin offering 3-month, 6-month, and 12-month contracts. The prices will be linked to external benchmarks such as JKM, WIM, Brent, and the company's GIXI index, launched in 2022.

IGX has recently signed an index sharing agreement with S&P Platts, a global provider of information and benchmark prices for the commodities and energy markets. Platform development is being carried out in the current Exchange system. IGX believes this will benefit participants by providing a competitive option for buyers and sellers over longer durations. Importantly, it will enable buyers to hedge against volatility risks in spot prices.

Demand outlook positive

In 2023, demand in India will have been growing year-on-year every month, the company said, with total gas consumption rising 13 percent till October as compared to the same period of the previous year, Mediratta said. The company said demand is expected to show a growing trend in the near term driven by the expansion of city gas distribution networks and increasing demand from the power sector.

Gas prices are currently showing lower volatility and are expected to remain less volatile. "Prices are expected to remain range-bound given brimming EU storage levels, robust LNG supply, high Norwegian pipeline gas supply, and sluggish Asian LNG demand," the company said in a presentation. However, temperatures across Europe and Asia will remain the key determinant for spot prices in the coming months, it said.

IGX has also been selected as one of the five empanelment agencies to carry out domestic gas (marketing and pricing freedom) auctions by the Directorate General of Hydrocarbons.