Monthly natural gas trades shoot up nearly 4x in January, says IGX

Rising global prices, cut in APM gas allocation behind higher trades

An increase in gas prices in the international market and a reduction in Administered Price Mechanism (APM) gas allocation to city gas distributors (CGDs) led to monthly gas volumes traded on the Indian Gas Exchange Limited (IGX) rising by 398 per cent in January, compared to January 2024. On a sequential basis, the traded volumes of 7.2 million metric million British thermal units (mmBtu) were 26 per cent higher than in December, the company said on Tuesday. IGX is the only national-level gas exchange for the physical delivery of natural gas.

 

Meanwhile, European and US gas prices were pulled up by supply concerns in international markets amid a strong winter in Europe and rising tensions with traditional supplier Russia. On the other hand, geopolitical tensions in West Asia have also led to a spurt in prices amid fears of skirmishes breaking out again between Israel and Iran. Higher sales from domestic gas producers added to growth in IGX volumes.

 

The Gas Index of India (GIXI) for December was Rs 1,213 or $14.1 per mmBtu, almost flat on a month-on-month basis but up by 21 per cent since January 2024. US and European spot international gas benchmark prices also recorded gains compared to last month, IGX said.

 

A total of 177 trades were executed during January, down from 193 trades in December, but higher than November’s 131 trades. The maximum number of trades were executed in the monthly contract format at 64, followed by weekly, daily, and day-ahead formats at 39, 29, and 24, respectively. The first-ever intraday trade was executed during the month.

 

The most active delivery point for free market gas was Mhaskal in Maharashtra and Gadimoga in Andhra Pradesh for ceiling price gas due to higher sales from domestic gas producers. Dahej in Gujarat accounted for 23 per cent of the free market volumes traded.

 

The Centre had cut the APM allocation to CGD players by 20 per cent in two successive months till November last year. This had led to city gas retailers increasing CNG prices by Rs 2-3 per kg as they had to replace the supply with more expensive non-APM gas or imported liquefied natural gas (LNG).

 

CGDs receive gas from older fields, called regulated or APM gas, at prices determined by the government. On the other hand, gas from new wells follows a formula linked to Indian crude oil prices. Currently, there is a ceiling price of $6.5 per mmBtu for APM gas, which may be increased yearly by about $0.5 per mmBtu till 2027. Meanwhile, the gas produced from new wells costs an additional $2 more.

 

Around 33 per cent of the trade volume was free market gas, while 67 per cent was domestic gas at the ceiling price.

 

IGX offers gas trades at 15 delivery points such as Dahej, Hazira, Ankot, Mhaskal, Bhadbhut, Dabhol, KG Basin, Gadimoga, and Suvali. It covers six regional gas hubs, namely Western Hub, Southern Hub, Eastern Hub, Central Hub, Northern Hub, and North Eastern Hub across India.