decreased foreign gas costs to boost use by over 30%, according to the MD of IGX
The government is aggressively promoting the use of gas-based energy to fulfill the rising power needs of local businesses and gas-based power plants, anticipating a surge in natural gas use due to a decline in global prices. In comparison to FY24, an approximate 30% to 35% increase in annual gas consumption is anticipated for FY25.
The reduction in international spot prices for gas from around $15 per mmbtu to $8 -11 per mmbtu (metric million British thermal units) a few months ago, according to Rajesh K. Mediratta, MD & CEO of Indian Gas Exchange, a platform for the physical trade of gas through transparent price discovery, expressed expectations that this financial year’s gas consumption would be significantly higher. This increase in consumption will be driven by the anticipated rise in the usage of gas for industrial power needs as well as the rising need for gas-based power plants.
He went on, “Many authorities, including those in Delhi and Uttarakhand, have mandated that the industry limit or curtail the usage of furnace oil, coal, and pet coke (dirty fuels). In order to fulfill the increased demand for electricity throughout the summer, the government has also released recommendations under Section 11, which is a fuel consumption standard for any defined class. These rules are intended to help gas-based power plants begin operations. The network of PNG and CNG stations is also being extended throughout the states. The country will need more gas due to all of these factors plus the lower costs elsewhere.
IGX has recently started small-scale LNG contracts with the goal of increasing gas consumption to fulfill the industry’s need for electricity. We are also going to discuss the long-term contracts, which will enable the bidder to submit a proposal for three, six, or a whole year. In order to give stakeholders flexibility in selecting a benchmark for their trade, Mediratta stated that the price discovery for these contracts will be connected to Brent Crude, JKM (the North East Asian price index for LNG), and WIM (the LNG price assessment for spot physical cargoes into ports in India and the Middle East region).
It should be noted that the IGX enabled trades for around 4 crore mmbtu in FY24, which is a decrease of more than 20% from the 5.1 crore mmbtu in FY23. According to Mediratta, the decreased supply of domestically generated gas available for trading on the platform in FY24 as opposed to FY23 is the cause of the decline in trade.
In reference to the government’s goal of having gas-based energy account for 15% of total energy consumption by 2030, Mediratta said, “At the moment, gas-based energy accounts for around 6% of total energy consumption. This occurred against the background of the Russia-Ukraine War, during which time gas prices skyrocketed to around $30 per millibarrel. The cost of generating one unit of energy is around Rs 6.5 to 7 at the current gas price of $8–11 per mmbtu, as opposed to Rs 12 per unit at the time when the price of gas was approximately $15 mmbtu, according to the MD of IGX.
