MUMBAI/NEW DELHI (Reuters) - India plans to set up a natural gas trading exchange as early as October this year to prepare for a surge in supply from India’s east coast and a slew of liquefied natural gas (LNG) terminals.
Oil Minister Dharmendra Pradhan in a meeting last week with industry officials set a deadline of Oct. 1 for the country’s primary natural gas distribution regulator to set up the exchange, said three sources familiar with the discussions.
The exchange is aimed at standardizing natural gas prices, said a government official, a consultant and a gas company executive, so that domestic prices are not set at such a discount to international market rates.
India currently imports LNG at global rates of around $7.50 per million British thermal units (mmBtu), while the government sets domestic gas prices at $3.06 per mmBtu.
“If we have proper pricing and market access, then it is easier for the gas sector to develop,” said Atanu Chakraborty, who heads India’s upstream regulator.
The exchange will also help to reduce the risks associated with the pricing differences, he said.
Details on how the gas exchange will function and how prices will be set were not immediately available. Phone calls to India’s oil ministry for more information have gone unanswered.
Prime Minister Narendra Modi has laid out a plan to increase the share of gas in India’s energy mix to 15 percent by 2030 from below 6.5 percent now, Oil Minister Pradhan said at a conference in Thailand last year.
India currently produces close to 90 million standard cubic meters per day (mscmd) of gas and imports another 70 mscmd as LNG, according to government figures for 2016-17.
In the next three to five years, as natural gas projects from India’s Oil and Natural Gas Corp and a partnership involving BP and Reliance Industries ramp up, India’s domestic gas output will be in the range of 140 mscmd, said Chakraborty.
LNG imports are expected to grow to around 50 million tonnes a year (160 mscmd) over the same period, he said, referring to Pradhan’s speech.
Sufficient supplies for the smooth operation of a gas exchange are one of the primary concerns.
India’s industrial gas consumers such as power plants and fertiliser makers were disappointed in 2010 after promised gas output from the east coast’s Krishna-Godavari basin fell short of expectations. Many facilities that were built in anticipation of more gas production remain stranded without adequate fuel.
The Reliance-BP partnership plans to develop three assets off India’s east coast, and state-owned ONGC is developing another gas field in the same region.
Reporting by Promit Mukherjee in MUMBAI and Nidhi Verma in NEW DELHI; Editing by Euan Rocha and Tom Hogue