Domestic gas producers allowed to sell 10% output on exchanges

Domestic gas producers allowed to sell 10% output on exchanges

In yet another reform initiative, the government has now allowed domestic gas producers such as ONGC, OIL, Reliance, and Vedanta to sell a small quantity of their produce, through gas exchanges, for better price discovery.

As per an office memorandum of the Petroleum and Natural Gas Ministry, domestic gas producers who have been granted marketing and pricing freedom after recent changes in the policy, will now be permitted to sell 500 million standard cubic metre (MSCM) or 10 per cent of annual production from the contract area through exchanges authorised by downstream regulator PNGRB.

“This is a landmark step towards development of the gas markets. Going forward, the gas producers such as ONGC, Oil India Limited, Reliance, Cairn Oil will be able to participate on the IGX platform. We now expect a much better liquidity on the sell side and therefore even more competitive price discovery on the Exchange platform,” Indian Gas Exchange Ltd Chief Business Officer Rajesh K. Mediratta said.

As per the government order, a gas producer will be required to furnish details of its production to the Directorate General of Hydrocarbons (DGH) and it would then certify that a company is eligible to undertake gas trade on exchanges.

After years of wait, the government last year decided to put domestically produced gas under a standard price discovery mechanism to help scale up local production from fields of the ONGC, the OIL, Reliance, and Vedanta and help create a uniform gas market.

Barring nomination blocks, gas produced from all other domestic fields now enjoys both marketing and pricing freedom.

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