Energy Security Current Affairs

Cabinet approves MoC between India and Japan to establish Liquid, Flexible and Global LNG Market

The Union Cabinet approved signing of Memorandum of Cooperation (MoC) between India and Japan on establishing a liquid, flexible and global Liquefied Natural Gas (LNG) Market.

The MoC provides framework to cooperate in facilitating flexibility in LNG contracts, explore possibilities of cooperation in establishing reliable LNG spot price indices reflecting true LNG demand and supply and abolition of Destination Restriction Clause.

The MoC aims to promote bilateral relationship between India and Japan in the energy sector. It also seeks to contribute to the diversification of gas supplies for India to strengthen energy security and provide more competitive prices for consumers.


India and Japan are major consumers of energy in world. In LNG sector, Japan is world’s largest importer and India is 4th largest importer. Under the Japan-India Energy Partnership Initiative signed in January 2016, both countries had agreed to work together in promoting well-functioning energy markets and affirmed to promote a transparent and diversified LNG market through relaxation of Destination Restriction Clause.


Government to set up think tank for oil sector

The Union Government will soon get Cabinet approval for setting up of high-powered think tank under Ministry of Petroleum to look into key issues related to oil and gas sector. Besides, Petroleum Ministry also has send proposal to Union Cabinet for setting up domestic gas trading hub to adopt better mechanism for price discovery of both domestic as well as imported gas.

Internal think tank

The think will give advice on technology, setting up a gas network, attracting more FDI in sector, reducing India’s oil imports by 10%, and developing innovative new models of financing projects. The members of think tank will include ICICI Bank MD and CEO Chanda Kocchar, New Development Bank (NDB) chief K.V. Kamath, former Chairman of 13th Finance Commission Vijay Kelkar, top officials from oil and gas majors from across world and officials from Ministry of Petroleum and Natural Gas.

Domestic gas trading hub

Currently, price of natural gas in country is determined through a government-mandated formula that links the local price to rates prevailing in gas-surplus nations. However, long-term contracts for gas import are linked to crude oil.


Domestic gas trading hub will help to move gradually towards transparent price mechanism determined through gas trading hub. It will help to reaffirming India’s resolve to cut carbon intensity of its GDP and increase gas use in energy mix to 15% from the current 6.5% where India lacks much behind world average of gas use in total energy consumption 24%.


India imports almost 60% of its petroleum requirements. Currently, price of natural gas in country is determined through government-mandated formula that links local price to rates prevailing in gas-surplus nations. However, long-term contracts for import of gas are linked to crude oil.

India is planning to shift towards gas-based economy, reduce greenhouse emissions and cut oil import. Governing is doubling its network of pipelines to transport natural gas to 30,000 km within next three-four years for shifting to gas-based economy.