India’s Gas Landscape Set for Transformation: IGX Introduces Small-Scale LNG

The Indian Gas Exchange (IGX) is on the brink of launching small-scale Liquefied Natural Gas (LNG) contracts on its trading platform. This initiative marks a significant step in the trading of natural gas in its liquefied or super-cooled form, diverging from the conventional route of regasification. The new offering, pending approval from the Petroleum and Natural Gas Regulatory Board (PNGRB), is poised to benefit areas in India not yet connected by natural gas pipelines, offering a viable alternative for increasing natural gas consumption.

The concept of small-scale LNG entails the direct use of LNG in its liquid form. This method bypasses the need for regasified LNG, which requires pipeline transport to consumers. Instead, small-scale LNG can be supplied using cryogenic road tankers, making it a feasible option for areas lacking pipeline infrastructure. One of the significant applications of LNG in this form is as a fuel for heavy commercial vehicles, providing an alternative to diesel in this sector. Notably, several Indian oil and gas companies are gearing up to promote the direct use of LNG as a vehicular fuel, making small-scale LNG an integral part of these plans.

The demand for road-transported LNG in India is anticipated to see a significant rise, from the current level of 0.7 MMSCMD to approximately 5 MMSCMD over the next five years. This growth underscores the potential impact of small-scale LNG contracts in the market. IGX aims to offer these contracts from various LNG terminals, including Dabhol, Hazira, Dahej, Kochi, and Ennore, where LNG will be transported by trucks via road.

Additionally, IGX is considering the launch of long-term contracts spanning three, six, and twelve months, linked to international benchmarks like JKM, WIM, and Brent. This move, alongside the small-scale LNG initiative, is part of a broader strategy to expand and diversify the gas trading options available on the platform.

In the context of cross-border trading, IGX is exploring possibilities for trading natural gas with Bangladesh, acknowledging the significant role of gas in Bangladesh’s economy. However, this plan is contingent on the development of necessary infrastructure, like pipelines, for efficient gas transport.

The growth of natural gas demand in India is expected to be driven primarily by the power sector in the short term, as gas-based power plants ramp up operations to meet the projected peak power demand for 2024. This demand from the power sector, along with the rising requirements of the City Gas Distribution (CGD) sector, is set to catalyze the overall growth in natural gas consumption in the country.



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