GAIL eyes 26% stake of gas exchange

The state-owned Natural Gas distributor, GAIL (India) plans to acquire around 26% stake in India’s first natural gas exchange that went online last week.
The move seems to be driven by future grow prospect as well as to maintain GAILs dominance in the domestic market.
According to an expression of interest (EoI) seeking its equity participation in a gas exchange, the state-owned firm wants to come in as a promoter with 26% equity stake.
GAIL has requested online offers from Party who shall submit EOI offering equity participation to GAIL in their Gas Exchange company established/ proposed to be established in India, for setting up gas exchange for natural gas trading and access on pan-India basis.

The Indian Gas Exchange provides day-ahead market and forward contracts, including daily, weekly, weekday, fortnightly and monthly, at three physical hubs in Dahej, Hazira in Gujarat, and Odoru in Andhra Pradesh.
It is believed that the transparent and neutral natural gas trading platform commonly known as “Gas Exchange” can further facilitate market-based mechanism. Additionally, the Gas Exchange is also expected to drive competition, leading to innovative business models and cost-efficient structures, thus supporting the overall affordability of gas.

This comes in the backdrop of the National Democratic Alliance government pushing for a gas-based economy. Gas accounts for around 6.2% of India’s primary energy mix against the global average of 24%.
The government plans to increase this to 15% by 2030. India’s gas demand is expected to be driven by fertilizer, power, city gas distribution and steel. The government also wants to set up a gas trading hub.
The public sector unit owns liquefied natural gas (LNG) terminals and is already a member of the natural gas trading platform, set up by Indian Energy Exchange.

GAIL has 12,000 km of gas pipeline infrastructure and plans to add another 7,600 km over the next five years. While around 108 million standard cubic metres a day (mmscmd) of gas is transported through its pipelines, GAIL markets around 96 mmscmd of gas.
India consumes around 145 mmscmd of gas, and along with China, it is expected to be a significant driver of demand for natural gas post 2021.

Being the biggest emitter of greenhouse gases after the US and China, India aims to achieve its emission reduction commitments through the use of natural gas and green fuel.
India, the world’s fourth-largest LNG importer is building up its LNG portfolio with Indian firms having inked long-term LNG contracts totalling 22 million metric tonnes per annum (mmtpa).
This news flow if materializes will be a big positive for IEX and for the entire domestic Gas sector as there would be a significant rise in business volumes and market expansion over the next 2-3 years ahead.

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