F&S Natural Gas India Bettadapura

8/8/2019 F&S Natural Gas India Bettadapura

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Subbu Bettadapura

Research Manager, Energy Practice, Frost & Sullivan

Challenges and Opportunities in the Indian NaturalGas Market

November 16th, 2007

2007 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan.

No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.


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Natural Gas Supply and Demand Trends in India

Gas Sector Policies and their Impact on the Industry

Role of Gas in Indias Power Generation Mix

Strategies for Overcoming Gas Shortage

Update on Gas Discoveries and Infrastructure Projects

Table of Contents


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Increasing energy demand India currentlyranked sixth in the world in terms of energydemand

Economy projected to grow at around 7% to 8%

over the next two decades Indian economy is highly vulnerable to supply

disruptions

Increasing dependence on imported oil - theInternationalEnergy Agency (IEA), projects thatIndia's dependence on oil imports will grow to

91.6% by the year 2020.

Shift to natural gas India to become a largeimporter of LNG and natural gas

Increased focus on domestic exploration andproduction

India - Rapidly Increasing Energy Demand Makes Attaining Energy Security A Challenge

Introduction


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Energy Consumption and Energy Mix World, Asia Pacific and India (2006)

World Asia Pacific India

Energy Consumption (MTOE) 10878.5 3641.5 423.2

Energy Mix (%)

Coal 28.4% 49.2% 56.2%

Oil 35.8% 31.5% 28.4%

Natural gas 23.7% 10.8% 8.5%

Nuclear 5.8% 3.5% 0.9%

Hydro 6.3% 4.9% 6.0%

Source: BP Statistical Review, 2007

Introduction


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Regional Snap Shot: Proved Gas Reserves (in Trillion Cubic Meters) in theAsia Pacific Region at the end of 2006

Introduction

TOTAL: 14.82 TCMSource: BP

Malaysia: 2.63

Indonesia: 2.76

China: 2.35

Bangladesh: 0.44

Australia: 2.52

India: 1.08Myanmar: 0.5

Brunei: 0.34

PNG: 0.44

Pakistan: 0.96

Thailand: 0.35

Vietnam: 0.40

1TCM=35.3TCF


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Proved Gas Reserves, India (2001 2006)

Source: BP Statistical Review, 2007

0.760.75

0.850.92

1.10 1.08

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2001 2002 2003 2004 2005 2006

Year

ProvedReserves(i

nTCM)

Supply and Demand Trends


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Gas Production and Consumption Growth, India (2001 2006)

Source: Data from BP Statistical Review, 2007

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2001 2002 2003 2004 2005 2006

Year

BC

Production

Consumption

Widening gapbetweenconsumptionandproduction. Productioninthe country notincreasing intune with consumption



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Gas Supply Current Situation

Domestic Supplies 32.3

LNG Imports 6.5

Total 38.8

BCM

Reserves/Production Ratio = 33.5years Domestic reserves are scattered

Gas Producing Fields

LNG Import Terminals

Source: Directorate General of Hydrocarbons (DGH), India



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Gas Consumption by End User Segments

Source: GAIL


2000 (22 BCM)

Fertilizer

40%

Other

Industries10%

Steel

6%

City Gas

1%

Petrochem/

Refinery5% Power

38%

2006 (39 BCM)

Power

40%

Petrochem/

Refinery

9%Other

Industries

15%

City Gas

4%

Steel

3%

Fertilizer

29%


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Gas Demand Projections By various agencies

Key Assumptions (for the high casescenario)

8% GDP growth rate

20% of power would be generatedusing gas

Fertilizer capacity would be all gasbased

Other End Users grow at 7%

Source: Planning Commission of India, Integrated Energy Policy, 2006

0

200

400

600

800

1000

1200

EIA High

Case

EIA Low

Case

IEA IHV 2025 India

Vision

2020

Power &

Energy

ivision

IRA e

MMSC

MD

2009-10

2014-15

2019-202024-25

2029-30

1111

430391

155225258295

EIA Energy Information Administration, USAIEA International Energy AgencyIHV India HydrocarbonVision 2025IRAde Integrated Research and Action for Development

1 MMTPA ~ 4 MMscmd ~ 1.34 BCM



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Sector Wise Gas Demand Projections

4.3

9.1

2.15.4

45.2

28.3

14.6

28.4

7.12.8

11.9

5.6

0

5

10

15

20

25

30

35

40

45

50

Powe

r

Fertiliz

er

CityGa

s

Petro

chem

/Refin

eries S

teel

OtherIn

dustries

BCM

2007-2008

2011-2012

Source: Gas Authority of India Limited (GAIL)

Total Demand2007-2008= 63.9 BCM2011-2012 = 100.9 BCM



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Gas Supply Outlook

Gas Source 2007 - 2008

(in BCM)

2011 - 2012

(in BCM)

National Companies 25.0 24.0

Private/Joint Ventures 8.3 20.4

Projected Domestic Supply 33.3 44.4

With the KG-basin discoveries coming on-stream, total projected supply (optimistic estimates) could

be around 70 BCM during 2011-2012

Source: DGH, India and GAIL



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Table of Contents


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Gas Sector Policies

Petroleum and Natural Gas Regulatory Board Act, 2006

Creation of an independent regulatory board for downstream activities Setting of up LNG Terminals, Storage, Marketing of LNG/NG simplified.No licensing required, onlyregistration

Exclusivity period for city gas distribution; Open competitive bidding Non-discriminatory open access for pipeline transmission; regulated tariff

Salient Features of the Act

Policy thrust on Energy Security Objectives are to Promote Investment and Foster Competition

100% FDI permitted in Pipelines/LNG/Marketing & Trading

LNG imports and gas marketing under open general license

Progressive decontrol of prices

0% import duty on LNG imports under consideration

Other important highlights of Indias gas sector policies

Policies


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Policies

In the Upstream sector, the New Exploration & Licensing Policy (NELP) was started in 1999 The licenses for exploration are awarded through an international competitive bidding system National oil companies are required to compete with Indian and foreign companies to secure petroleum exploration licenses

Fiscal and Contractual Terms of NELP

No payment of signature, discovery or production bonus

No customs duty on imports required for petroleum operations

No minimum expenditure commitment during the exploration period

No mandatory state participation/carried interest by NOCs.

Freedom to sell crude oil and natural gas in domestic market at market related prices

No cess on crude oil production

Royalty payment for crude oil on ad-valorem basis

- 12.5% for onland areas

- 10% for offshore areas Royalty on deep water areas (beyond 400m bathymetry)

- 5% for first seven years after commencement of commercial production

Infrastructure status

- 7 years tax holiday from commencement of production


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Gas Pricing Evolving to Free Market Pricing

Pre-2004 Present Future

100 % GovernmentControlled

Single Price for all usersand sources

Cost plus basis

60% government controlled- for Power, fertilizer, smallcustomers

Multiple prices (US$2 US$10per MMBTU)

NOCs- Administered Private Market related RLNG Market related

Free MarketPricing

Alignment withglobal trends

Source: GAIL

Policies


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Table of Contents


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Power Generation Mix INDIA, 2006

Source: Frost & Sullivan

Fuel Share of Installed Capacity, India, 2006

132 GW

Natural Gas

11%

Nuclear

3%

Other

5%

Hydro26%

Oil

1%

Coal

54%

Gas to increase its share in the power generation mixto 20% by 2030

Private power generators have revealed a preferencefor gas-fired generation

Gas accounts for over one-third of IPP capacity and is

concentrated in the Western and Southern region

Gas supply is a major source of concern forinvestment in gas based power projects

Gas at a delivered price of about $3 mmbtu isconsidered the critical threshold for demand from thepublic power sector.At a price beyond $3.5/mmbtu gas

is viewed as a too expensive fuel for public powerproduction.

Coal to remain dominant as the leading fuel for powergeneration

Gas to Power


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Power Sector Reforms

Salient features of the Electricity Act 2003

Generation free from licensing Captive Generation is free from controls. Open access to Captive generating plants subject to

availability of transmission facility Open access to the transmission lines to be provided to distribution licensees, generating

companies

Accelerated Power Development and Reform Program (APDRP) aimed at distribution sectorreforms to make the power sector commercially viable

Gas to Power


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Vertically

Integrated

Mixed

StructureUnbundled

Not Privatized

Privatization

Underway

Significant

Privatization

Fully

Private

China

India

Sing

MalayIndo

Japan

Korea

Key: Sing-Singapore; Indo-Indonesia; Malay-Malaysia; Phil-Philippines;

Viet-Vietnam; Thai-Thailand; Tai Chinese Taipei

Phil

Thai

Tai

Viet

Power Sector Reform Status in Asia


Gas to Power


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Fertilizers

Recommendations to switch over to 100% gas based capacities

CNG/City Gas

Environmental concerns driving the growth of the CNG industry

Clean fuel made mandatory in major cities

City Gas program a huge success in many cities in India

Reforms in other End User Industries

Gas to Power

Reforms in the end user segments aimed at promoting efficiency in fuel/feedstock

Gas emerging as the fuel of choice


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Table of Contents


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Overview of Domestic E&P Activities

Proven Commercial Productivity

CambayBasin Krishna-Godavari

Basin

Mahanadi Basin

North AgartalaBlock

BarmerBasin

Identified Prospects

Prospective Basins

Source: DGH, India

Strategies


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Strategies for Overcoming Gas Shortage Increasing Domestic E&P Activities

Blocks Awarded under Pre-NELP & NELP

NELP VII Bidding Round to Likely to Commence in November/December 2007 Nearly 25blocks each block with 5,000 sq km to 9,000 sq km would be thrown open under the NELP-VII

bid

Round Year Onland Shallow

Offshore

Deep Water Total Awarded Currently

Under

Operation

Pre-NELP Prior to 1999 17 11 0 28 17

NELP-I 1999 1 16 7 24 20

NELP-II 2000 7 8 8 23 18

NELP-III 2002 8 6 9 23 23

NELP-IV 2003 10 0 10 20 20

NELP-V 2005 12 2 6 20 20

NELP-VI 2006 25 6 21 52 52

Source: DGH, India

Strategies


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E&P Statistics (2005-2006)

Deployment of Rigs Offshore: 37

Source: DGH, India

Exploratory Wells Drilled Total: 198

Development Wells Drilled Total: 220 Deployment of Rigs Onshore:93

OIL, 8

P

T/J

, 84ONGC, 106

OIL, 23

P

T/J

, 33

ONGC, 164

OIL, 0P T/J , 9

ONGC, 28

OIL, 14

P T/J , 9

ONGC, 70

Strategies

OIL: Oil India Limited, ONGC: Oil & Natural GasCorporation Limited, PVT/JV: Private/JointVenture


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Increasing LNG Imports

LNG Terminal 2007 - 2008

Capacity (in MMTPA)

2011 - 2012

Capacity (in MMTPA)

Dahej 5.00 10.00

Hazira 2.50 2.50

Dabhol 1.20 5.00

Kochi - 5.00

Mangalore - 2.50

Total LNG Supply (MMTPA) 8.70 25.00

1 MMTPA ~ 1.34 BCM

Source: GAIL

Strategies


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Exploiting Coal Bed Methane Reserves

Coal Bed Methane Production Begins

Great Eastern Energy Corp Ltd currently hasabout two dozen wells in West Bengal andplans to drill 300 more over the comingyears

Indias CBM reserves estimated at 16TCF

26 blocks awarded under 3 CBM rounds

Indias Directorate General of Hydrocarbonshas approved the drilling of more than 100CBM wells that over the next four years will

involve total investments of $150 million.

Source: DGH, India

Strategies

1TCM=35.3TCF


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Exploiting other Gas Sources

Insitu coal/Lignite gasification

Gas Hydrates

Estimated potential placed at 1894 TCM ofgas from gas hydrates

Surface coal gasification

GAIL MoU with the Canadian company astechnology partner for undergroundcoal/lignite gasification projects

ONGC MoU with Russian University

Focus Areas 5

States Gujarat, Rajasthan, Tamil Nadu, AndhraPradesh and West Bengal

ONGC MoU with Shell. GAIL and ONGC plan to use Shell

Technology for surface coal gasification

Likely locations for Pilot plants: Gujarat,West Bengal and Orissa

Strategies


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Imports - Gas Sources for India

Strategies


IRAN: 28.3 TCM

MYANMAR: 0.54 TCM

AUSTRALIA: 2.61 TCM

QATAR: 25.36 TCM

TURKMENISTAN: 2.86 TCM

SAUDI ARABIA: 7.07 TCM

ABU DHABI: 5.96 TCM

1TCM=35.3TCF

Turkmenistan-Afghanistan-PakistanPipeline

Iran-Pakistan-India Pipeline

Myanmar-Bangladesh-

India Pipeline


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Table of Contents


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Gas Discoveries in India

Discoveries

Krishna Godavari Basin

ONGC

Uppidi-1

KG-DWN-A-1KG-DWN-E-1

KG-DWN-U-1KG-DWN-W-1

Reliance

Dhirubhai 1 & 3

D6

Rajasthan

Focus Energy

SGL1

Mahanadi BasinMDW-4A


North AgartalaKunjaban-2


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Gas Grid

Planned Pipelines: 8400 Km at an

investment of US$ 5 billion

City Gas Projects

City Gas projects to be extended to 22 other

cities at an investment of US$ 2 billion

LNG Terminals

16.25 MMTPA of LNG terminal capacity to

be added at an investment of US$ 2 billion

Infrastructure Development Upcoming projects

Projects

HyderabadJamnagar

New Delhi

Chennai

Ennore

Kochi

Bangalore

Mangalore

Dabhol

Kolkata

Planned Pipelines

Bhopal

LNG Terminals to be functional 2009-2012



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Field Surveys

Drilling equipment and services

Well assessment

Production Platforms supply

Support and Maintenance services forDevelopment

projects

Pipelines

LNG import terminals and Re-gasification plants

Offshore Supply Vessels (Diving Support Vessels,

ROV Support Vessels, Pipe-laying vessels)

Equipment supply (Turbo-machinery, etc)

Gas to Power (Gas power plants)

Opportunities in Gas E&P and Infrastructure Development projects

Opportunities

Equipment Supply (Drilling, Turbo-machinery, etc) and Services

Offshore SupplyVessels

Offshore Support and MaintenanceServices

Best Opportunities

F&S Natural Gas India Bettadapura

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