MCX: first to launch Natural Gas futures contracts

MCX (Multi Commodity Exchange of India Ltd.) today announced the launch of natural gas futures trading. Mr. Murli Deora, Honorable Union Minister for Petroleum and Natural Gas inaugurated the commencement of trading in the contracts.

 

According to the Expert Committee Report on Integrated Energy Policy, 2005 the share of natural gas in energy consumption is expected to increase from 9% at present to almost 23% in the next 25 years. The supply of gas from private sector, which is currently at 27% is also expected to increase to 64% by 2010 -11. Commenting on the economic importance of natural gas during the ceremony Mr. Deora said, "Natural gas is gaining importance as an alternative source of clean and competitive energy in view of the sky-rocketing crude oil prices."

 

The BP Statistical Review of World Energy, 2006 shows that India's natural gas consumption in 2005 was 36.6 BCM (Billion Cubic Meters), surpassing the production of 30.4 BCM in the country. The current import of natural gas is around 22% of the domestic consumption.

 

At the launch ceremony, MCX Managing Director and CEO, Mr. Jignesh Shah, said, "We intend to provide the Indian energy market participants an opportunity to trade in natural gas rupee-denominated contracts that are linked to global price benchmarks. MCX is extremely pleased to provide price discovery and risk management services in this segment."

 

More than one lakh natural gas contracts are traded on the New York Mercantile Exchange (NYMEX) on a daily basis with prices fluctuating between 5-6% on an average (NYMEX website). MCX is initially launching contracts for August, and September 2006 on ex-Hazira delivery basis with daily price limits of 4%. The prices of these contracts are based on NYMEX settlements, following the exclusive licensing agreement entered into by the Company in June 2006.

 

Natural Gas is used mainly in the industrial, commercial, transport and domestic sector. According to the Ministry of Petroleum and Natural Gas, the power and fertilizer sector are the largest consumers of natural gas. Current trends (recent LNG imports) in the industry demonstrate convergence of Indian prices to the international level. This may continue with the Government policy to integrate the hydrocarbon sector with the international market. 

 

Sourced From : Concept Public Relations India Pvt. Ltd.