The Petroleum and Natural Gas Regulatory Board (PNGRB) has come up with new regulations to regulate the establishment and operation of the gas exchange and clearing corporations. The regulations will apply to the delivery-based contracts for natural gas or liquefied natural gas (LNG) transacted on the Gas Exchange (day-ahead contracts, intra-day contracts and term-ahead contracts); pipeline capacity contracts; and any contract for trading of natural gas or LNG, including those with price linkage to other established markets or reported indices either in India or otherwise.
Accordingly, PNGRB may initiate action for market coupling of a Gas Exchange with another exchange, where a commodity, which is produced by utilising natural gas as a major input, is traded, so as to minimise the risk of a producer of such commodity. Pursuant to such empowerment, as may be required, PNGRB may extend applicability of these regulations, with or without modifications, for derivative, forward and future contracts in respect of such commodities and services, and such type of contracts as specified under sub-regulation. Further, subject to the compliance of applicable laws, the board may allow contracts at the Gas Exchange denominated in foreign currency, subject to settlement in rupees.
With regard to its applicability, the regulations will apply to all market participants including Gas Exchange, natural gas pipeline entity, gas producer, gas aggregator, gas shipper, trading licensee, LNG terminal or natural gas importer, National Gas Grid Management Services, clearing corporation, member of Gas Exchange, member of clearing corporation and any other party transacting at the gas exchange.
Accordingly, PNGRB has permitted all the gas exchanges to introduce such contracts for transacting on the Gas Exchange. The Gas Exchange may introduce any new contracts, as specified under PNGRB’s regulations, after prior approval of the board, and such approval will not be unreasonably withheld by the board. However, for approval of new contracts, PNGRB may examine a no. of parameters, namely type of contract (intra-day, day-ahead, term-ahead contract and like other contracts); price discovery methodology and matching rules proposed; transaction period (when transaction will commence and for what tenure transaction session will continue before commencement of delivery); risk management mechanism; margin mechanism; final price settlement mechanism; gas delivery mechanism; delivery duration; and penalty for contractual deviation.