Deora inaugurates India's 1st Futures Trading in Natural Gas by MCX

Mumbai, July 10 (UNI) India has stepped up its efforts for sourcing its Natural Gas requirements, despite facing problem on various parameters including pricing front with certain countries, Union Minister for Petroleum and Natural Gas Murli Deora said here today.

Speaking at a function to launch the Futures Trading in Natural Gas by Multi-Commodity Exchange of India (MCX), Mr Deora said during his last month visit to China, he had held talks with various countries for sourcing India's natural gas requirements. ''Talks were also going on with Iran to sourcing natural gas from them but we do have some problems there,'' he said and nodded affirmatively to a poser that the problem was on the pricing front.

Earlier, Mr Deora inaugurated the country's first Futures Trading in Natural Gas at a function here. A top MCX official emphasised the importance of future trading saying it would help in insulating the natural gas consuming industry (power, fertilizer etc) from volatile global gas prices. For instance, he continued, in case of rising prices, a component of natural gas requirement is hedged in the futures market thus offsetting the losses in the physical market with the gains in futures market.

Mr Dinshaw Patel, Minister of State for Petroleum&Natural Gas said that considering the fact that India was deficient in natural gas, there was a need to arrange for the supply of the same to sustain 8 per cent growth in GDP. He said the Government was taking several measures to improve the availability viz intensification in domestic exploration and production (E&P) activities under New Export Licensing Policy(NELP), import of natural gas through transnational gas pipeline from Iran, Myanmar and Turkemenistan and import of natural gas in the form of liquified natural gas(LNG).

Mr M.S.Srinivasan, Secretary, Petroleum&Natural Gas, speaking on the occasion cautioned against speculative elements in futures trading in natural gas. He pointed out that the price of ethanol had overshot the gasoline prices at NYMEX (New York Mercantile Exchange) because of speculative activity. He said MCX should ensure that only producers, consumers and transporters were involved in the futures trading in natural gas and not the speculative traders.

Currently, India imports natural gas to the tune of around 22 per cent of its domestic consumption in 2005.

As against India's consumption of natural gas at 36.6 BCM (Billion Cubic Meters), its production stood at 30.4 BCM in 2005, according to the BP Statistical Review of World Energy, 2006.

At the launch ceremony, MCX Managing Director and CEO Jignesh Shah, said, ''We intend to provide the Indian energy market participants an opportunity to trade in natural gas rupee-denominated contracts that are linked to global price benchmarks. MCX is extremely pleased to provide price discovery and risk management services in this segment.'' More than one lakh natural gas contracts are traded on the New York Mercantile Exchange (NYMEX) on a daily basis with prices fluctuating between 5-6% on an average (NYMEX website), it may be noted.

MCX is initially launching contracts for August and September 2006 on ex-Hazira delivery basis with daily price limits of 4 per cent.

The prices of these contracts are based on NYMEX settlements, following the exclusive licensing agreement entered into by the Company in June this year.

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