The average price of natural gas on the Indian Gas Exchange (IGX) has more than doubled since April 2021 and is now trading at around $ 13.8 per million British thermal units (mBtu) in September 2021.
This reflects the strong demand for spot gas in the market which has also seen prices rise based on global signals.
According to IGX data, the weighted average gas selling price in April 2021 was $ 6.1 per mBtu. The price rose steadily over the following months and closed in August 2021 at 12.5 per mBtu. September prices, which are already higher than last month, are expected to maintain the bullish path.
Demand for natural gas has picked up in Asia and is expected to increase further with the onset of winter in Europe, while supply cuts are made worse by hurricanes and lower production in the Gulf of Mexico. “Gas inventories are below five-year average levels in the United States and Europe. The price of gas at the Henry hub is $ 5.20 per mBtu, a new high. Prices on local stock exchanges are higher, mimicking international rates, ”said Mohit Kumar, research analyst at IDFC Securities. Commercial standard.
Maximum trade was recorded in July 2021 at 398,550 mBtu. The weighted average price also hit double digits this month and closed at $ 10.4 per mBtu. This coincided with a coal shortage due to supply chain constraints and put pressure on electric utilities. They ended up buying gas-fired power plants at a higher price.
The volume of trading on IGX also increased significantly compared to the previous year. The total volume traded in 2020-2021 was 193,700 mBtu. This figure increased by 489% to reach 1,140,450 mBtu through September 2021 in fiscal year 2021-22.
“If you look at the demand segment, it’s made up of huge underutilized / stranded gas-fired power plants and industrial customers with captive dual-feed power plants. The other segment would include refineries, fertilizers and ceramics companies, among others, ”said Gaurav Moda, head of energy practice, EY India.
“About 10-20% of those with captive power plants (which once ran solely on coal) have switched to the dual feed option. The transfer capacity exists there and they are able to get the most out of it by buying from the market, which is largely industrial consumers, ”he added.
While IGX’s volume and price gains are substantial, they only affect specific industries such as ceramic manufacturing. Indeed, most of the natural gas in India is sold at prices linked to the administered price mechanism (APM) (for domestic production) or international spot prices (for imports).
“The gas exchange volumes are only 0.2 million standard cubic meters (mmscmd) per day. The total gas consumption in the country is around 140 mmscmd, half of which is imported. The rest
70 mmscmd is produced in the country, ”Kumar said.
An upward revision is also expected from October 1 this year as part of the MPA. Oil and Natural Gas Corporation (ONGC) and Oil India officials say gas prices for these companies are expected to rise by 50%. This will lead to a 10-11% increase in the prices of compressed natural gas (CNG) and piped natural gas for consumers across the country, according to a report from ICICI Securities.
Currently, the price of domestic gas is $ 1.79 per mBtu. The maximum allowable selling price for gas produced from areas of high pressure and high temperature, deep water and ultra-deep water (collectively referred to as difficult finds) is $ 3.62 per mBtu.
According to an analysis by CARE Ratings, 31 percent of domestic natural gas is used by the electricity sector, 27 percent for fertilizers and 19 percent in the town gas distribution sector. India covers half of its natural gas needs through domestic production.