IGX starts discovering benchmark pricing for gas in India

by Jeremy


As more and more gas fields get commissioned in India from RIL, ONGC and Cairn, we expect the volumes to increase and benchmark to become a reality soon, he said.

Six months after formally starting as a gas exchange, IGX has started discovering gas pricing for India that will help create a benchmark index for Indian gas market.

Rajesh Kumar Mediratta, director at IGX told FE that after starting with a very small quantity of 1,500 mmBtu in December last year, the trading gained momentum and now the volume on average is around 100,000 mmBtu of gas every month. Without the Covid-19 interruption, the volumes would have been double the current trade.

“Also, one of the endeavours of the exchange was to set a benchmark index for gas prices in India, and to that extent we have started discovering the pricing that will help buyers to compare various gas prices, imported versus the IGX prices on the exchange before taking a final decision,” Mediratta said.

There is a huge mismatch between the imported price and the ability and willingness of end consumers to pay that price. “The benchmark prices are mostly assessment prices and cannot be a benchmark for Indian buyers. For example, if the benchmark JPM price at present is $11 per mmBtu, our discovered price on IGX is cheaper at around $7-$8/mmBtu,” Mediratta said.

The IGX prices have remained well below the spot and long-term prices since January in the range of 9%-23% for spot prices and between 32%-37% compared to long-term contracts.

As more and more gas fields get commissioned in India from RIL, ONGC and Cairn, we expect the volumes to increase and benchmark to become a reality soon, he said.

“We have also requested the government to allow trading of domestic APM and marketing freedom gas on the exchange, which under the existing guidelines issued in October 2020 can only be sold through e-auctions,” Mediratta said.

IGX was launched on June 15, 2020, and received final regulatory approval to trade as an exchange in December 2020. Till date, IGX has traded around 5,46,100 mmBtu (million metric British thermal unit) of gas through spot and long-term contracts. From April 1- year-to-date, the exchange has traded around 352,400 mmBtu of gas, while in June till date the exchange has traded around 1,58,400 mmBtu of gas.

Some of the major contributing industries have been glass, power, city gas distribution, textile and resellers.

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