Oil and Gas Sector – HELP, Open Acreage Policy, etc.

India to launch gas trading hub


Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Natural gas trading hub, Petroleum and Natural Gas Regulatory Board

Mains level: India’s ambition of becoming a gas-based economy and various issues associated with it

Developing an ecosystem for gas trading

  1. The government plans to launch a natural gas trading hub by October
  2. It will also be creating an Indian gas benchmark which will spark a surge in consumption of the cleaner-burning fuel
  3. Oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has sought bids to hire a consultant to help develop a regulatory framework for operationalizing the gas trading/exchange hub

What’s in the offing

  1. In order to further boost the consumption of natural gas in the country, Government is considering the establishment of a Gas Trading Hub / Exchange (GTHE)
  2. Here natural gas could be traded and supplied through a market-based mechanism instead of multiple formula driven prices

Current mechanism

  1. Currently, the government fixes the price of the bulk of domestically produced natural gas
  2. The rate is arrived at using price prevalent in gas-surplus nations of US, Canada, UK, and Russia

Internationally accepted practice

  1. A hub is used as a central pricing point for a network that could aid better price discovery for domestic as well as imported gas
  2. India is not only country launching trading hub
  3. China plans to launch a natural gas trading hub in Chongqing this year
  4. The world’s biggest natural gas hub is the Henry Hub in the US state of Louisiana
  5. Britain has National Balancing Point (NBP) as the main gas hub


Petroleum and Natural Gas Regulatory Board (PNGRB)

  1. The Petroleum and Natural Gas Regulatory Board Act, 2005 establishes the Petroleum and Natural Gas Regulatory Board (PNGRB) to regulate downstream activities in the petroleum and natural gas sector
  2. The PNGRB shall regulate the laying and expanding of (a) transmission pipelines for gas and petroleum and (b) city/ local gas distribution networks
  3. Entities will have to register with the PNGRB to market petroleum products and natural gas, operate LNG terminals and establish storage facilities beyond specified capacity
  4. PNGRB will monitor PNG prices and can take corrective measures to prevent restrictive trade practice by the entities
  5. The PNGRB will have the same powers as a civil court to settle disputes. The Appellate Tribunal under the Electricity Act will serve as the Appellate Tribunal for this Act

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