India Gas Exchange CEO Optimistic About Increased Adoption Due to Lower Prices
The head of India's only gas trading platform is optimistic that the decline in gas prices this year will drive industrial users in the country to transition from dirtier fossil fuels. Rajesh Kumar Mediratta, the Chief Executive Officer of the Indian Gas Exchange, anticipates a surge in trading volumes as cheaper supplies become more readily available. To facilitate access to gas at fixed prices, the exchange is considering offering longer-duration contracts.
India, a country heavily reliant on coal, aims to increase the share of gas in its energy mix to 15% by the end of the decade. Currently, gas accounts for only about 6% of the energy mix. The Indian Gas Exchange trades both spot LNG and gas from domestic deep water fields. The prices of domestically-produced gas have decreased, partly due to a drop in the Asian benchmark, which has more than halved this year.
Indian consumers, including power plants and petrochemical facilities, are highly sensitive to prices and often choose gas as an alternative to cheaper and more polluting options. The government has been actively supplying affordable gas to households, fuel stations, and industrial users. As pipeline infrastructure expands, demand in India, the fourth-largest LNG buyer globally, is expected to rise. The Indian Gas Exchange, established in 2020, offers trading in spot and forward contracts and counts State-owned Gail India Ltd., Oil and Natural Gas Corp., and Indian Oil Corp. among its investors.
Impact of Increased Gas Adoption on New Businesses
The optimism expressed by the CEO of the Indian Gas Exchange, Rajesh Kumar Mediratta, about the increased adoption of gas due to lower prices, presents both opportunities and challenges for new businesses in the energy sector.
For starters, the anticipated surge in trading volumes due to cheaper supplies becoming more readily available presents a ripe opportunity for new businesses to enter the market. The government's active role in supplying affordable gas to households, fuel stations, and industrial users also signals a supportive environment for businesses in the gas sector.
However, the challenges are equally significant. The transition from coal to gas in a country heavily reliant on coal could be slow and fraught with resistance from existing industries. Additionally, the decrease in prices of domestically-produced gas, partly due to a drop in the Asian benchmark, could mean thin profit margins for new businesses.
In conclusion, while the increased adoption of gas in India presents promising opportunities, new businesses must navigate the challenges strategically to ensure their survival and growth in this evolving market.