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Gas Pooling Mechanism and the Need for Government Regulations

Transparency Market Research includes new market research report "Gas Pooling Mechanism Market" to its huge collection of research reports.


Albany, NY -- (SBWIRE) -- 10/17/2014 -- Gas pooling refers to the mechanism through which gas is pooled along liquefied natural gas so as to make extraction of gas affordable for customers such as power generation and fertilizers industries. Gas pooling mechanism has been used in India in the past as well, in ways direct or indirect. Gas pooling mechanism is not new in India. Indian Ministry of Petroleum and Natural Gas has been pooling significant volumes of various domestic and liquefied natural gas reserves to make gas affordable for priority sectors such as power generation and fertilizers.

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Behind this step is the intension of assisting priority sectors in shifting gradually towards gas pricing based purely on market dynamics. The approach is no doubt commendable, but is such that it will gives a reminder about some policies introduced in the past, having similar intentions but which later became difficult for dismantling.

Though the scenario speaks only of India and the approach towards gas pooling mechanism in the country, it has parallels with similar conditions in most developing countries. Developing nations are mostly dependent upon oil and gas imports to meet the ever-increasing demands of power amid scarce in-house energy resources.

Gas pooling mechanisms allow extraction of gas along-with that of LNG. While this may sound a beneficial business and a supplementary approach by government for assisting low-cost power consumption, gas pooling mechanism can bring with it multiple risks. This is because the pooling of LNG is a high-priced business and that of gas pooling, in conjunction with it, is low-cost. This could lead LNG negotiators in entering into unattractive contracts. To ensure that something like this does not happen, the necessity of keeping politics away from the gas pooling mechanism is necessary.

Gas Pooling Mechanism – Implications on LNG Market Dynamics

The development of gas pooling mechanism may spur establishment of new models of business for traders and aggravators, who would consecutively address needs of different gas buyers and suppliers from a variety of end-user segments. Participation of suppliers in the supply chain would be necessary to make sure that price of gas, and thus that of LNG is truly representative of the domestic gas market. Vibrancy of an effective gas pooling mechanism market will require taking many institutional, administrative as well as structural steps.

Gas pooling mechanism could also send positive indication to upstream investors, thus help countries in achieving the objective of energy security. A vibrant trading platform like this can also give LNG businesses a price reference for long term LNG contracts with developing economies.

Gas Pooling Mechanism – Conclusion

Gas pooling mechanism may rightly aim at increasing consumption of costly LNG and provision of low cost gas to price-sensitive sectors such as power generation and fertilizers, but a number of drawbacks are associated with the concept. Considering that the policy of introducing gas pooling mechanism, mostly in developing countries, is oriented towards for-reaching long-term goals, an averaging of LNG and gas prices at the end-user level should be proposed.

Developing a trading platform remains the ultimate solution for managing an effective gas pooling mechanism, and for discovering the standard of prices and creating the required depth in the global market. This would allow securing the energy needs of developing nations over the long haul.

Gas Pooling Mechanism Market – Key Market Players

A number of domestic businesses operate in regional markets of gas pooling mechanism market. Some key players in the gas business in the Indian market, capable of entering the market of gas pooling mechanism include Reliance Industries Ltd (RIL), Oil India Limited (OIL) and Oil & Natural Gas Corporation Ltd (ONGC).

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