INDIAS CHANGING GAS

SCENARIO

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WORLD PAST AND FUTURE
ENERGY DEMAND GROWTH OF 1.8%
GAS DEMAND GROWTH OF 2.3%
EMERGING ECONOMIES ENERGY DEMAND GROWS AT
3.5 TO 4%
INDIAS ENERGY DEMAND PROJECTED TO GROW AT 5%

World Natural Gas Consumption

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GLOBAL INITIATIVES ON GAS SUPPLY

World gas consumption growth by 2.3%

Large gas reserves to be monetized
Focus on gas development
Indias increasing share of gas
Better monetary yields on gas

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WORLD LNG SCENARIO
LNG MARKET WORLDWIDE IS AROUND 140 MMTPA
AND LIKELY TO INCREASE TO 180-220 MMTPA BY 2010
THE MARKET HAS GROWN AT 9% IN 2006 AS
COMPARED TO 2005
MAJOR GROWTH HAS BEEN IN ASIA AND ASIA PACIFIC
MARKET
USA MARKET HAS SEEN A NEGATIVE GROWTH IN
LAST TWO YEARS
UK MARKET WOULD SEE A LOWER GROWTH FOR
LNG CONSUMPTION DUE TO HIGHER PIPELINE
SUPPLIES

GAS IS THE ENERGY SOURCE

OF THE FUTURE

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WORLD LNG SCENARIO
HOWEVER THE SUPPLY WORLDWIDE IS
TIGHT TILL 2010-2011
TRADITIONAL AREAS OF DEMAND ARE JAPAN
KOREA CHINA USA AND EUROPE
LONG TERM AVAILABILITY AFTER 2012-13
NEW PRODUCTIONS FROM RUSSIA, QATAR,
IRAN ,AUSTRALIA, NIGERIA & TRINIDAD
TOBAGO TO INCREASE AVAILABILITY

DEMAND OUTSTRIPS SUPPLY

IN THE WORLD

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OVERVIEW OF THE INDIAN GAS MARKET

Natural Gas is emerging as the

preferred fuel
Indias Gas Demand is increasing at
a rapid pace
Indias Supply options need a
realistic assessment
Pricing of gas provides a challenge
for India

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DRIVERS FOR INDIAN GAS MARKET GROWTH

LARGE NEW GAS DISCOVERIES

REGULATION IN GAS SECTOR

GAS PRICING REFORMS

PIPELINE INFRASTRUCTURE

EVOLVING SPOT LNG MARKET

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OUTLOOK FOR GAS DEMAND -INDIA

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GROWTH OF NATURAL GAS IN INDIA

Energy demand growth of 5%, Gas demand growth of 7%

Mix of Supply options
Industry using liquid fuels
LNG import is a viable option

Demand of Natural Gas in MMSCMD

SECTOR 2007-08 2008-09 2009-10 2010-11 2011-12

Power 80 91 103 114 127
Fertilizer 41 43 52 80 79
City Gas 12 13 14 15 16
Industrial 15 16 17 18 20
Petrochemicals/ 25 27 29 31 33
Refineries/ Internal
Consumption
Sponge Iron/ Steel 6 6 7 7 8
Total 179 196 222 265 283

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SHARE OF NATURAL GAS
Major user power & fertilizer
Increasing share of gas use
Industries switching to gas
Gas share to increase to 20%
Supply through mix of options
Share of natural Gas Use in India

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PROJECTED DEMAND SUPPLY GAP FOR GAS

Demand Supply Gap (MMSCMD)

Years 2007-08 2009-10 2011-12
DEMAND 179 222 283
ONGC + OIL Supplies 57 56 51
Private / JVs Supplies 23 60 57
Total Gas Supplies 80 116 108
Dahej 18 18 18
LNG Dahej Expansion 0 9 18
Hazira 9 9 9
Kochi 0 0 18
Dabhol 4 18 18
Terminals Ennore 0 0 ?
Mangalore 0 0 4
Total LNG Imports 31 54 85
Total LNG + Domestic Gas 111 170 193
GAP 68 52 90

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IMPORT OF SPOT CARGOES

LARGE UNMET DEMAND FOR GAS

MEETING PEAK DEMAND FOR POWER IN SUMMER
PETRONET LNG DESIGNATED TO SOURCE SPOT CARGOES
DAHEJ TERMINAL TO REGASIFY 1.25 MMTPA ADDITIONAL LNG

current shortfall:

Power 2.5 MMTPA (peak load)

Fertilizer 2.5 MMTPA

Other industries 2.0 MMTPA

Spot LNG cargoes imported by GAIL/PLL and Shell

Spot Cargoes sold to Power/Fertiliser/ Steel & other Industries

17 Spot cargoes imported during 2006
30 Spot cargoes to be imported during 2007

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POINTS TO PONDER ON INDIAS DEMAND AND SUPPLY
FORECASTS

DEMAND:
How realistic the demand numbers
Why no large scale imports despite large deficit
Policy intervention through allocation of supply
Electricity generation at what price of gas
Will gas remain an under-priced fuel

SUPPLY:
Delay in bringing new discoveries to the market
Validation of figures in new finds
Where will domestic gas price find its level

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ASSESS INDIAS SUPPLY OPTIONS

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INDIAS SUPPLY OPTIONS FOR GAS

SHORT TERM
Distribution of available resources
Slow down dependence on Gas where viable options
are available
Investment in Technology
Bridge gap from imports

MEDIUM TERM
Enhance domestic supplies
Build infrastructure
Transnational Pipelines
Develop long term LNG supplies
Look at alternatives e.g. coal bed methane potential
supply 3.78 BCM in XI Plan

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UPSTREAM EFFORTS IN NATURAL GAS

New Exploration
Licensing Policy
6 rounds of bids
162 Exploration Blocks
Many deep water blocks
Gas discovery in KG offshore
Gas Discovery-Bay of Bengal
Discovery by ONGC in KG basin
Coal bed Methane
About 50 BCM (140 MMSCMD)
potential additional production
by 2012

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PIPELINE IMPORTS OF NATURAL GAS

Proposed Pipeline Imports

Bangladesh- India
Iran- Pakistan- India Pipeline
Myanmar India pipeline
Turkmenistan-India
40 BCM potential

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SPECIAL FEATURES OF INDIAN GAS MARKET

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CHANGING USER PROFILE INDIAN MARKET

Traditional user Power & Fertilizer

LNG in refineries for fuel & feedstock's
Demand from transport sector (CNG)
Gas for City Gas Distribution- Potential demand
20MMSCMD
Petrochemical feed-stocks and LPG use in Domestic
sector
C2/C3 extraction
C3/C4 extraction (LPG)

Replacing liquid fuels in sectors

Glass & ceramics,
Chemicals
Industries
Sponge Iron
Automotive Industries

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POLICY INITIATIVES DESIRED

Industry demanding following incentives for

making imported gas/LNG affordable for
power & fertilizer sector:

Infrastructure status
Duty drawback
Declared goods status for gas

These incentives are provided to captive LNG

terminals to power project
Standalone LNG terminals catering to needs
of an array of power and fertilizer plants do
not enjoy these benefits

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GAS PRICING : THE CHANGING PHASES

Present
Past
(2007-2008) Future
(Pre 2004)
100% Government 60% Government Free Market Pricing
Controlled Controlled
- Power, Fertiliser,
Single Price for Small Customers Competitive to alternatives
Multiple Prices
all users and sources
(US$ 2 10 / MMBTU)
- NOCs Administered
Cost plus basis Alignment with global
- Private Market Related
trends
- RLNG Market Related

PRICING MOVING TOWARDS DEREGULATION

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MAJOR CHALLENGES FOR INDIAN GAS INDUSTRY

Establishment of price acceptance across

sectors including Power
Pursue Deep Sea, Coal gas, Gas Hydrates
technologies
Emphasis on imports through LNG and
Transnational pipelines
Creating infrastructure
Institutional support for training to create
trained manpower pool
Prioritisation of gas uses
Explore and develop new fields
Investing in developing gas fields across
frontiers

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