Gas trading 'Hub' proposal for Hazira or Mora

Vol 7, PW 17 (05 Nov 03) People & Policy

Any takers for a spot market for gas in India, where you can buy and sell gas like any other commodity To some it might sound surreal, given the huge demand for gas that forces companies to pull political strings to get supplies.

But Gujarat State Petronet is not among the doubters. Convinced the concept will work, GSPL commissioned consultant Ernst & Young to carry out a market study and has just received its final report.

E&Y vindicates GSPL's optimism. "Ernst & Young tell us the idea is worthwhile and will be accepted in the market," says a GSPL source.

"We want to provide depth and liquidity to the gas market." GSPL believes the ideal location for a spot market is Gujarat - India's only state with significant gas infrastructure. Within Gujarat, GSPL has identified Hazira or Mora as possible locations.

Hazira is home to the Niko-operated gasfields and Shell's upcoming 5m t/y LNG terminal while nearby Mora is emerging as a pumping point for Hazira natural gas as well as LNG from Shell. GSPL describes its futuristic gas spot market as India's first gas 'hub'.

"The idea is to create something similar to the 'Henry Hub' market set up in the US in the 1990s as a pricing point for gas." Without a spot market for gas, believes GSPL, the domestic market won't evolve. "There has to be a transparent mechanism to reach a price for gas," says our source.

"Today anybody and everybody keeps throwing prices around." GSPL believes its gas hub will work only when supply exceeds demand and not in the present situation of gas scarcity. A surplus situation, says GSPL, will emerge when Shell's LNG lands in Gujarat next year.

"By that time we will also have LNG from Petronet-LNG, gas from Cairn's Gauri gasfield, additional gas from Panna, Mukta and Tapti as well as existing supplies (from Hazira, Cairn's Lakshmi gasfield and GAIL)." If a gas hub is in place by then, feels GSPL, pricing and transactions will be faster. What is the response from the market "We've had preliminary talks with gas companies.

The response is overwhelmingly in favour." GSPL wants its spot market to be a purely computer-based, online trading platform that could later develop into an exchange offering products like futures and derivatives.