IGX's Gas Index-Based Prices Trend At Nearly Half The Spot LNG

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Liquefied natural gas prices remain high despite falling from September peak of $44 per metric million British thermal unit. A spectacular drop is not expected in the coming months given the continuing war between Russia and Ukraine.

The fuel, however, is trading at nearly half the international price on the India Gas Exchange, the nation’s only trading platform for the fuel for domestic buyers of LNG, including fertiliser, city gas distribution, power and gas-based industries.

The GIXI, or the gas index from IGX, was at $19.6 a unit as on Dec. 23. The contract for January is priced at $18.5 a unit compared with the landed price for spot LNG that is around $32-34 per unit.

The GIXI-based on a pool of gas comprising fuel from challenging fields of domestic producers that can’t be sold at higher than the six-monthly capped price, and surplus held by large importers like GAIL India Ltd., and Petronet LNG Ltd.

IGX launched the index on Dec. 20 to help market participants know the inland gas prices and take suitable decisions. It is also seen as a precursor to the gas futures market, which will help stakeholders hedge pricing risk.

“As compared to other indices around the world, like the Japan-Korea Marker and Transfer Title Facility Gas index for the European Union, that provide assessment-based pricing, our prices are realistic and based on actual demand and supply, resulting in real trades,” Rajesh Kumar Mediratta, managing director of IGX, told BQ Prime.

“It’s not possible to buy or sell based on other Europe and north-east Asia-based indices, but it’s possible to trade on GIXI prices, even at prices arrived at for the current and next 1-2 months.”

In the two years since the launch of IGX, the platform has seen a trade volume of 1 billion cubic meters. The daily traded volume has grown six times to 7 million metric standard cubic metres as on Dec. 23.

That’s about 20% of the 30 mmscmd spot gas brought into the country, he said. India consumes around 156 mmscmd of gas, of which 50% is imported.

“We expect the trade on our platform to grow further with ONGC and Reliance Industries bringing gas from challenging fields to the exchange,” Mediratta said.

RIL sold 3.6 mmscmd on the exchange in 2022, while ONGC contributed 0.7 mmscmd.

“Given that the e-auctions by ONGC, the domestic gas producer, were not successful, ONGC and RIL are selling their incremental gas through exchanges, which has boosted the volumes on the exchanges,” Mediratta said.

According to him, key enablers for India’s gas market would be fertiliser plants buying through IGX; a unified tariff by the Petroleum and Natural Gas Regulatory Board by April 1; and bringing gas under the GST net.



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