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MCX launches futures trading in natural gas

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Opportunity to trade in rupee-denominated deals

MR MURLI Deora, Union Minister for Petroleum and Natural Gas (right), and Mr Jignesh Shah, Managing Director, MCX, at the launching function of `Natural Gas Futures Trading' in Mumbai on Monday. Shashi Ashiwal
MR MURLI Deora, Union Minister for Petroleum and Natural Gas (right), and Mr Jignesh Shah, Managing Director, MCX, at the launching function of `Natural Gas Futures Trading' in Mumbai on Monday. Shashi Ashiwal

Our Bureau

Mumbai, July 10

The Multi Commodity Exchange of India Ltd (MCX) has announced the introduction of futures trading in natural gas.

The intention is to provide Indian energy market participants an opportunity to trade in rupee-denominated natural gas contracts that are linked to global price benchmarks, said Mr Jignesh Shah, Managinsg Director and CEO, at the launch of the trading facility on Monday.

With this introduction, MCX will be providing price discovery and risk management services in this segment, he said.

Natural gas

Natural gas is gaining importance as an alternative source of clean and competitive energy in view of the skyrocketing crude oil prices, said Mr Murli Deora, Union Minister for Petroleum and Natural Gas, at the inauguration of the facility.

Initially, the MCX will provide contracts for August and September 2006 on ex-Hazira delivery basis with daily price limits of four per cent.

The prices of these contracts are based on NYMEX settlements, following the exclusive licensing agreement entered into by MCX with that exchange in June 2006.

Currently, gas is bought and sold through bilateral contracts; these are on a fixed price basis and very rigid in nature, according to Mr Joseph Massey, Deputy Managing Director, MCX.

New facility

The new facility will allow consumers to hedge at least part of their requirements, he added.

Increasingly, many companies in the medium-sized industrial segment that seek to use natural gas for environmental and other reasons would find futures trading in natural gas useful.

Going ahead, even large entities such as fertiliser or power companies could go in for futures trading, he said.

(This article was published in the Business Line print edition dated July 11, 2006)
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