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India’s plans for a natural gas trading hub in limbo

9th January 2019

By: Ajoy K Das

Creamer Media Correspondent

     

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KOLKATA (miningweekly.com) - Having missed the December deadline to establish a national gas trading hub, India is unlikely to push ahead with its plans in the immediate future without solving the vexed issue of unbundling operations of State-run natural gas infrastructure owner and marketer GAIL India.

The Petroleum and Natural Gas Ministry last year drew up plans to establish a national gas trading hub by December 2018, along the lines of physical trading platform Henry Hub in the US, or a virtual trading platform like Balancing Point, in the UK.

But the Ministry set a pre-condition that the gas trading hub would need to have an independent natural gas transportation pipeline network offering open access to all trading participants which would have entailed splitting up GAIL’s marketing and its 11 000 km pipeline network businesses, ending GAIL’s monopoly of the domestic gas transportation network.

However, the government has been caught in a catch-22 situation with GAIL maintaining that the option of splitting its operations could only be considered once the domestic gas trading market ‘matured’, while the Ministry has been steadfast in holding that open access to its pipeline network is a necessity to offer a level playing field to gas traders without a monopoly in transportation facilities and making pipelines a public utility.

Since the proposal for establishing a natural gas trading hub was first floated last year, GAIL has been opposed to splitting the company. After much prodding from the government, GAIL in a slight shift of stance turned amenable to such a move but only once the domestic natural gas market matured and its share in domestic energy mix increased to 15% from about 6% at present.

The Ministry said in a note that continuation of GAIL as the dominant natural gas transporter and marketer at the same time would lead to conflict of interest and risk the operations of independent traders at the proposed hub, which could be denied competitive terms in transportation facilities.

In a statement before Parliament, Petroleum and Natural Gas Minister Dharmendra Pradhan said, “in view of the administrative, legal and operational issues involved, a precise timeframe for operatilization of the gas trading exchange cannot be indicated at this stage”.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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