Indian Gas Exchange

  • On 15th June, 2020, the government has launched Indian Gas Exchange (IGX) –first nationwide online delivery-based gas trading platform.

Need

  • Domestically produced natural gas currently accounts for less than half the country’s natural gas consumption; imported Liquefied Natural Gas (LNG) accounts for the other half.
  • LNG imports are set to become a larger proportion of domestic gas consumption as India moves to increase the proportion of natural gas in the energy basket from 6.2% in 2018 to 15% by 2030.

About Indian Gas Exchange (IGX)

  • IGX will be a delivery-based trading platform for delivery of natural gas.
  • Incorporated as a wholly owned subsidiary of the Indian Energy Exchange (IEX) - India’s energy market platform, IGX will enable market participants to trade in standardised gas contracts.
  • The platform is fully automated with web-based interface to provide seamless trading experience to the customers.

Mode of Working

  • The IGX will offer six market products beginning from day-ahead market and forward contracts including - Daily, Weekly, Weekday, Fortnightly and Monthly at three physical hubs in Dahej, Hazira in Gujarat and Kakinada in Andhra Pradesh.
  • The gas exchanges are expected to work on the lines of power exchanges, which determines the price based on supply and demand and market forces.
  • The exchange also allows much shorter contracts – for delivery on the next day, and up to a month – while ordinarily contracts for natural gas supply are as long as six months to a year.
  • Imported Liquified Natural Gas (LNG) will be re-gassified and sold to buyers through the exchange, removing the requirement for buyers and sellers to find each other.

Limitation

  • As the price of domestically produced natural gas is decided by the government, so, it will not be sold on the gas exchange.

Significance

  • Through IGX, India's vision on mega investments on Liquefied Natural Gas (LNG) terminals, gas pipelines, CGD infrastructure and permission for market driven price mechanism will be materialized.

Impact

  • IGX will play an instrumental role in transforming India’s gas markets, positioning India as a sustainable economy and enhancing industry’s competitiveness.
  • The exchange will help bring down the price of natural gas through competitive trade, boosting usage in the country that relies heavily on cheaper coal for its energy needs.
  • IGX will drive industrial competitiveness, sustainability, spur investments in the gas value chain, deliver efficient utilisation of the pipeline infrastructure as well as ensure revival of gas-based power plants.
  • It will architect India as a market-based gas economy, whilst also leading to sustainable environmental benefits.
  • It would also help small consumers to get short-term supply of fuel at competitive rates.

Liquefied Natural Gas (LNG)

  • LNG is natural gas (predominantly methane, CH4, with some mixture of ethane, C2H6) that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport.
  • To enable maritime transport, the natural gas is cooled down by means of a refrigerated cycle (compression, condensation, expansion, evaporation) that transforms the gas into a liquid form at -160°C: this is known as Liquefied Natural Gas (LNG).
  • The combustion of natural gas primarily emits water vapour and small amounts of carbon dioxide (CO2).
  • This property means that associated CO2 emissions are 30 to 50% lower than those produced by other combustible fuels.
  • Russia has the world's largest supply of natural gas, followed by Iran and Qatar.
  • It is used as a feedstock in the manufacture of fertilizers, plastics and other commercially important organic chemicals as well as used as a fuel for electricity generation, heating purpose in industrial and commercial units.

Source : Civil Services Chronicle Online, June, 2020