Centre weighs building natural gas trading hub
natural gas trading hub to help develop a competitive domestic gas market. The oil ministry officials recently held a meeting with gas industry executives to discuss the need for a hub, where prices reflect the domestic supply and demand fundamentals, according to people familiar with the matter. The government may soon set up a committee to suggest a roadmap to build a hub, they said.
Henry Hub in the US offers the most referenced gas pricing in the world due to its large trading volume, liquidity and transparent pricing. Henry Hub is a gas pipeline in Louisiana connected to several gas markets in the US. It serves as the delivery point for futures contracts on the New York Mercantile Exchange (NYMEX).
Britain's National Balancing Point (NBP) is a virtual hub, which reflects the gas price in the entire country without factoring in the transport costs, which are levied separately.
An effective trading hub in India will need to facilitate both physical and futures markets as in the case of Henry Hub, said an industry executive. India will need to deregulate gas pricing to make more domestic volumes available for trade, disallow transport and marketing of gas by the same entity to ensure non-discriminatory access to infrastructure, and increase involvement of financial institutions for a large effective gas exchange, multiple executives said.
India set up a gas trading exchange, the Indian Gas Exchange, four years ago. This is the only physical delivery-based gas exchange in the country, where daily traded volumes
