Gas trading hub likely to be set up before year-end

 A natural gas trading hub, on the lines of energy exchange, is likely to be set up in India before the end of the year.

According to Satpal Garg, Member, Petroleum and Natural Gas Regulatory Board, services of Crisil have been enlisted to work out the modalities for making this a reality.

Speaking on the sidelines of introducing the 9th City Gas Distribution Bidding Round, here, Garg said, “The thinking behind setting up such as hub is to create an Indian benchmark, ensure fair pricing and encourage the use of natural gas. The consultant will facilitate in development of a regulatory framework for operating the gas trading hub.”

The broader goal of setting up of such an exchange or hub is to encourage the consumption of cleaner fuel like natural gas, by facilitating trading and supply through a market-based mechanism instead of multiple formula-driven prices.

Garg explained that the Government currently fixes the prices of bulk domestically produced natural gas and the rate is arrived at through a mechanism which factor in the prices in gas surplus nations and various other issues.

Gas prices vary from one place to another and the hub is aimed at ensuring that the prices are market driven. Similar gas trading hubs function in the US, the UK, and the setting up of a gas trading hub is aimed at ensuring better price discovery for both domestic as well as imported gas.

The Henry Hub in the US serves as a benchmark with the prices based on gas delivery at the hub.

Garg said this hub will work as an electronic exchange and will play a major role as the country seeks to increase the consumption of natural gas from about 6.2 per cent of the total energy pool to about 15 per cent.

Significantly, it will also play a role as the country as it seeks to develop a network of gas pipelines and a national gas grid and eventually when the city gas distribution network gets bigger.

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