IGX expects PNGRB approval for longer gas contracts by early May: CEO Rajesh Mediratta

Rajesh K Mediratta, MD & CEO, IGX

Indian Gas Exchange (IGX) expects approval of the Petroleum and Natural Gas Regulatory Board (PNGRB) for longer-term-ahead gas contracts by early May, MD & CEO Rajesh Mediratta told Moneycontrol.

IGX, the first gas exchange in India, had applied to PNGRB for approval of introduction of three-month, six-month, and 12-month or yearly contracts on the trading platform. Currently, IGX provides day-ahead contracts and five term-ahead contracts including daily, weekday, weekly, fortnightly and monthly.

“PNGRB is considering our application. It should make sense and it should align with what they think is valid for as a contract. Whatever we do should be transparent, non-discriminatory and should not have an issue with any consumer or producer,” said Mediratta. The application would now go for public consultation, he added.

The IGX head said volumes of IGX are expected to increase by 30 percent after the exchange launches the sought contracts. For the proposed contracts, IGX has linked prices with Brent and JKM benchmarks instead of a fixed pricing mechanism which would allow fair pricing and eliminate risks for these longer contracts, he said.

The company also received approval for trading of small-scale liquefied natural gas (ssLNG) contracts in mid-March and would be launching the same via a webinar by the end of the month.

Promoted by the Indian Energy Exchange (IEX) and NSE, IGX allows multiple buyers and sellers to trade in spot and forward contracts at designated delivery points. The gas exchange's strategic investors include GAIL (India), Indian Oil, ONGC, Adani Gas and Torrent Gas.

Lower volumes

Mediratta told Moneycontrol that trade volumes at IGX have been quite low in the current month primarily due to delayed summers this year and the shutdown of some fertiliser plants. In March the exchange has handled 3.4 lakh mmBtu (million metric British thermal units) until now, compared to 56 lakh mmBtu last year.

“The demand was relatively low in March. This was due to a shutdown in several fertiliser plants in the month and lower demand from CGDs (city gas distributors). Power demand has also not picked up yet due to delay in summers this time,” he said.

Mediratta, however, remains optimistic about the current month’s volumes, saying several purchases are expected to happen in the second half of the month. He said domestic gas from Reliance Industries and ONGC is currently costing more than spot gas and therefore has not found buyers yet. Gas from domestic producers would also be sold in the later part of March, he added.

The government has set a ceiling price of HPHT gas at $9.96 per mmBtu, whereas spot prices are currently trading around $8-$9 per mmBtu. The buyers would also have to spend extra for the delivery of gas from Reliance and ONGC fields.

Gas share in energy mix

With rising energy demand in the country, India has set an ambitious target of increasing the share of natural gas in the total energy mix to 15 percent by 2030 from the current 6 percent.

Mediratta said achieving a nine percent gas share in the total mix would also be an achievement considering the energy base is widening in the country. “The base is going up and a lot of demand addition is also happening. In the power sector as well consumption is rising. So our base has increased but gas consumption has not increased significantly,” he said.

Mediratta said experts believe India’s gas consumption would go up to 290-300 MMSCMD by 2030, compared to the current 190 MMSCMD. He said the power sector and CGDs would be the main sectors driving growth for gas consumption as prices decline and availability goes up in the market. Mediratta expects gas prices to decline and trade around $5- $6 per mmBtu by 2026.