GAIL (India) Ltd plans to introduce its own LNG price discovery mechanism for the domestic market. This is to help local consumers get expensive gas at competitive rates.

The prevailing LNG price in the global market is $12-15/mBtu. In the domestic market LNG from long-term contracts is being sold at about $8.5/mBtu, while that from spot is being sold at a higher price.

GAIL will post an average LNG price on its Web site, based on which customers can bid, an official said. In other words, in the bidding process mechanism the roles of buyers and sellers will switch.

In an ordinary auction, the buyers compete to obtain a good or service and the prices typically increase over time. In a bidding process auction, sellers compete to obtain business and prices decrease over time.

GAIL is actively pursuing LNG sourcing from global LNG producers/sellers. It has been adopting a strategy to have a mixed portfolio of spot, short/mid-term, and long-term deals. Besides, GAIL is in talks to add six to eight additional suppliers under its fold.

The proportion of LNG is expected to increase to anywhere between 20 per cent and 30 per cent by 2015. The company also plans to use its Singapore-based investment arm for LNG trading.

GAIL imported its first spot cargo from Algeria in 2006. During the first half of 2011 it imported five spot cargoes. In addition to this it imported one cargo through Petronet LNG Ltd.

Besides, GAIL is reviving the LNG terminal at Ratnagiri (erstwhile Dabhol) in Maharashtra. It is currently exploring all the possible options of sourcing around five mtpa of LNG for the terminal.

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