Challenges and Opportunities in the Indian Natural Gas Market   November 16 th , 2007 Subbu Bettadapura Research Manager, ...
<ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Indust...
<ul><li>Increasing energy demand – India currently ranked sixth in the world in terms of energy demand </li></ul><ul><li>E...
Energy Consumption and Energy Mix – World, Asia Pacific and India (2006) Source: BP Statistical Review,  2007 Introduction...
Regional  Snap Shot: Proved Gas Reserves (in Trillion Cubic Meters) in the  Asia Pacific Region at the end of 2006 Introdu...
Proved Gas Reserves, India (2001 – 2006) Source: BP Statistical Review, 2007 Supply and Demand Trends
<ul><li>Widening gap between consumption and production. Production in the country not increasing in tune with consumption...
Gas Supply – Current Situation BCM <ul><li>Reserves/Production Ratio = 33.5 years </li></ul><ul><li>Domestic reserves are ...
Gas Consumption by End User Segments Source: GAIL Supply and Demand Trends
Gas Demand Projections – By various agencies <ul><li>Key Assumptions (for the high case scenario) </li></ul><ul><li>8% GDP...
Sector Wise Gas Demand Projections Source: Gas Authority of India Limited (GAIL) Total Demand 2007-2008 =  63.9  BCM 2011-...
Gas Supply Outlook With the KG-basin discoveries coming on-stream, total projected supply (optimistic estimates) could be ...
<ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Indust...
Gas Sector Policies Petroleum and Natural Gas Regulatory Board Act, 2006 <ul><li>Creation of an independent regulatory boa...
<ul><li>Fiscal and Contractual Terms of NELP </li></ul><ul><li>No payment of signature, discovery or production bonus </li...
Gas Pricing – Evolving to Free Market Pricing Pre-2004 Present Future <ul><li>100% Government Controlled </li></ul><ul><li...
<ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Indust...
Power Generation Mix – INDIA, 2006 Source: Frost & Sullivan Fuel Share of Installed Capacity, India, 2006 132 GW <ul><li>G...
Power Sector Reforms <ul><li>Salient features of the  Electricity Act 2003 </li></ul><ul><li>Generation free from licensin...
Vertically  Integrated Mixed  Structure Unbundled Not Privatized Privatization  Underway Significant Privatization  Fully ...
<ul><li>Fertilizers </li></ul><ul><li>Recommendations to switch over to 100% gas based capacities </li></ul><ul><li>CNG/Ci...
<ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Indust...
Overview of Domestic E&P Activities Proven Commercial Productivity Cambay Basin Krishna-Godavari Basin Mahanadi Basin Nort...
Strategies for Overcoming Gas Shortage – Increasing Domestic E&P Activities Blocks Awarded under Pre-NELP & NELP <ul><li>N...
E&P Statistics (2005-2006) Deployment of Rigs – Offshore: 37 Source: DGH, India Exploratory Wells Drilled – Total: 198 Dev...
Increasing LNG Imports 1 MMTPA ~ 1.34 BCM Source: GAIL Strategies 25.00 8.70 Total LNG Supply (MMTPA) 2.50 - Mangalore 5.0...
Exploiting Coal Bed Methane Reserves Coal Bed Methane Production Begins <ul><li>Great Eastern Energy Corp Ltd currently ha...
Exploiting other Gas Sources Strategies Insitu coal/Lignite gasification Gas Hydrates <ul><li>Estimated potential placed a...
Imports - Gas Sources for India Strategies Source: Frost & Sullivan IRAN: 28.3 TCM MYANMAR:  0.54 TCM AUSTRALIA: 2.61 TCM ...
<ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Indust...
Gas Discoveries in India Discoveries Krishna Godavari Basin ONGC Uppidi-1 KG-DWN-A-1 KG-DWN-E-1 KG-DWN-U-1 KG-DWN-W-1 Reli...
<ul><li>Gas Grid </li></ul><ul><li>Planned Pipelines: 8400 Km at an investment of US$ 5 billion </li></ul><ul><li>City Gas...
<ul><li>Field Surveys </li></ul><ul><li>Drilling equipment and services </li></ul><ul><li>Well assessment </li></ul><ul><l...
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Challenges and Opportunities in the Indian Natural Gas Market

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Frost & Sullivan analysis of the Indian Natural Gas Market.

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Challenges and Opportunities in the Indian Natural Gas Market

  1. 1. Challenges and Opportunities in the Indian Natural Gas Market November 16 th , 2007 Subbu Bettadapura Research Manager, Energy Practice, Frost & Sullivan © 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.
  2. 2. <ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Industry </li></ul><ul><li>Role of Gas in India’s Power Generation Mix </li></ul><ul><li>Strategies for Overcoming Gas Shortage </li></ul><ul><li>Update on Gas Discoveries and Infrastructure Projects </li></ul>Table of Contents
  3. 3. <ul><li>Increasing energy demand – India currently ranked sixth in the world in terms of energy demand </li></ul><ul><li>Economy projected to grow at around 7% to 8% over the next two decades </li></ul><ul><li>Indian economy is highly vulnerable to supply disruptions </li></ul><ul><li>Increasing dependence on imported oil - the International Energy Agency (IEA), projects that India's dependence on oil imports will grow to 91.6% by the year 2020. </li></ul><ul><li>Shift to natural gas – India to become a large importer of LNG and natural gas </li></ul><ul><li>Increased focus on domestic exploration and production </li></ul>India - Rapidly Increasing Energy Demand Makes Attaining Energy Security A Challenge Introduction
  4. 4. Energy Consumption and Energy Mix – World, Asia Pacific and India (2006) Source: BP Statistical Review, 2007 Introduction 0.9% 3.5% 5.8% Nuclear 6.0% 4.9% 6.3% Hydro 56.2% 49.2% 28.4% Coal 28.4% 31.5% 35.8% Oil 8.5% 10.8% 23.7% Natural gas Energy Mix (%) 423.2 3641.5 10878.5 Energy Consumption (MTOE) India Asia Pacific World
  5. 5. Regional Snap Shot: Proved Gas Reserves (in Trillion Cubic Meters) in the Asia Pacific Region at the end of 2006 Introduction TOTAL: 14.82 TCM Source: BP 1TCM=35.3TCF Malaysia: 2.63 Indonesia: 2.76 China: 2.35 Bangladesh: 0.44 Australia: 2.52 India: 1.08 Myanmar: 0.5 Brunei: 0.34 PNG: 0.44 Pakistan: 0.96 Thailand: 0.35 Vietnam: 0.40
  6. 6. Proved Gas Reserves, India (2001 – 2006) Source: BP Statistical Review, 2007 Supply and Demand Trends
  7. 7. <ul><li>Widening gap between consumption and production. Production in the country not increasing in tune with consumption </li></ul>Gas Production and Consumption Growth, India (2001 – 2006) Source: Data from BP Statistical Review, 2007 Supply and Demand Trends
  8. 8. Gas Supply – Current Situation BCM <ul><li>Reserves/Production Ratio = 33.5 years </li></ul><ul><li>Domestic reserves are scattered </li></ul>Gas Producing Fields LNG Import Terminals Source: Directorate General of Hydrocarbons (DGH), India Supply and Demand Trends 6.5 LNG Imports 38.8 Total 32.3 Domestic Supplies
  9. 9. Gas Consumption by End User Segments Source: GAIL Supply and Demand Trends
  10. 10. Gas Demand Projections – By various agencies <ul><li>Key Assumptions (for the high case scenario) </li></ul><ul><li>8% GDP growth rate </li></ul><ul><li>20% of power would be generated using gas </li></ul><ul><li>Fertilizer capacity would be all gas based </li></ul><ul><li>Other End Users grow at 7% </li></ul>Source: Planning Commission of India, Integrated Energy Policy, 2006 1111 430 391 155 225 258 295 EIA – Energy Information Administration, USA IEA – International Energy Agency IHV – India Hydrocarbon Vision 2025 IRAde – Integrated Research and Action for Development 1 MMTPA ~ 4 MMscmd ~ 1.34 BCM Supply and Demand Trends
  11. 11. Sector Wise Gas Demand Projections Source: Gas Authority of India Limited (GAIL) Total Demand 2007-2008 = 63.9 BCM 2011-2012 = 100.9 BCM Supply and Demand Trends
  12. 12. Gas Supply Outlook 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 Supply and Demand Trends 44.4 33.3 Projected Domestic Supply 20.4 8.3 Private/Joint Ventures 24.0 25.0 National Companies 2011 - 2012 (in BCM) 2007 - 2008 (in BCM) Gas Source
  13. 13. <ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Industry </li></ul><ul><li>Role of Gas in India’s Power Generation Mix </li></ul><ul><li>Strategies for Overcoming Gas Shortage </li></ul><ul><li>Update on Gas Discoveries and Infrastructure Projects </li></ul>Table of Contents
  14. 14. Gas Sector Policies Petroleum and Natural Gas Regulatory Board Act, 2006 <ul><li>Creation of an independent regulatory board for downstream activities </li></ul><ul><li>Setting of up LNG Terminals, Storage, Marketing of LNG/NG simplified. No licensing required, only registration </li></ul><ul><li>Exclusivity period for city gas distribution; Open competitive bidding </li></ul><ul><li>Non-discriminatory open access for pipeline transmission; regulated tariff </li></ul>Salient Features of the Act <ul><li>Policy thrust on Energy Security </li></ul><ul><li>Objectives are to Promote Investment and Foster Competition </li></ul><ul><li>100% FDI permitted in Pipelines/LNG/Marketing & Trading </li></ul><ul><li>LNG imports and gas marketing under open general license </li></ul><ul><li>Progressive decontrol of prices </li></ul><ul><li>0% import duty on LNG imports under consideration </li></ul>Other important highlights of India’s gas sector policies Policies
  15. 15. <ul><li>Fiscal and Contractual Terms of NELP </li></ul><ul><li>No payment of signature, discovery or production bonus </li></ul><ul><li>No customs duty on imports required for petroleum operations </li></ul><ul><li>No minimum expenditure commitment during the exploration period </li></ul><ul><li>No mandatory state participation/carried interest by NOCs. </li></ul><ul><li>Freedom to sell crude oil and natural gas in domestic market at market related prices </li></ul><ul><li>No cess on crude oil production </li></ul><ul><li>Royalty payment for crude oil on ad-valorem basis </li></ul><ul><li>- 12.5% for onland areas </li></ul><ul><li>- 10% for offshore areas </li></ul><ul><li>Royalty on deep water areas (beyond 400m bathymetry) </li></ul><ul><li>- 5% for first seven years after commencement of commercial production </li></ul><ul><li>Infrastructure status </li></ul><ul><li>- 7 years tax holiday from commencement of production </li></ul>Policies <ul><li>In the Upstream sector, the New Exploration & Licensing Policy ( NELP ) was started in 1999 </li></ul><ul><li>The licenses for exploration are awarded through an international competitive bidding system </li></ul><ul><li>National oil companies are required to compete with Indian and foreign companies to secure petroleum exploration licenses </li></ul>
  16. 16. Gas Pricing – Evolving to Free Market Pricing Pre-2004 Present Future <ul><li>100% Government Controlled </li></ul><ul><li>Single Price for all users and sources </li></ul><ul><li>Cost plus basis </li></ul><ul><li>60% government controlled </li></ul><ul><ul><li>- for Power, fertilizer, small customers </li></ul></ul><ul><li>Multiple prices (US$2 – US$10 per MMBTU) </li></ul><ul><ul><li>NOCs- Administered </li></ul></ul><ul><ul><li>Private – Market related </li></ul></ul><ul><ul><li>RLNG – Market related </li></ul></ul><ul><li>Free Market Pricing </li></ul><ul><li>Alignment with global trends </li></ul>Source: GAIL Policies
  17. 17. <ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Industry </li></ul><ul><li>Role of Gas in India’s Power Generation Mix </li></ul><ul><li>Strategies for Overcoming Gas Shortage </li></ul><ul><li>Update on Gas Discoveries and Infrastructure Projects </li></ul>Table of Contents
  18. 18. Power Generation Mix – INDIA, 2006 Source: Frost & Sullivan Fuel Share of Installed Capacity, India, 2006 132 GW <ul><li>Gas to increase its share in the power generation mix to 20% by 2030 </li></ul><ul><li>Private power generators have revealed a preference for gas-fired generation </li></ul><ul><li>Gas accounts for over one-third of IPP capacity and is concentrated in the Western and Southern region </li></ul><ul><li>Gas supply is a major source of concern for investment in gas based power projects </li></ul><ul><li>Gas at a delivered price of about $3 mmbtu is considered the critical threshold for demand from the public power sector. At a price beyond $3.5/mmbtu gas is viewed as a too expensive fuel for public power production. </li></ul><ul><li>Coal to remain dominant as the leading fuel for power generation </li></ul>Gas to Power
  19. 19. Power Sector Reforms <ul><li>Salient features of the Electricity Act 2003 </li></ul><ul><li>Generation free from licensing </li></ul><ul><li>Captive Generation is free from controls. Open access to Captive generating plants subject to availability of transmission facility </li></ul><ul><li>Open access to the transmission lines to be provided to distribution licensees, generating companies </li></ul><ul><li>Accelerated Power Development and Reform Program ( APDRP ) aimed at distribution sector reforms to make the power sector commercially viable </li></ul>Gas to Power
  20. 20. Vertically Integrated Mixed Structure Unbundled Not Privatized Privatization Underway Significant Privatization Fully Private China India Sing Malay Indo 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 Source: Frost & Sullivan Gas to Power
  21. 21. <ul><li>Fertilizers </li></ul><ul><li>Recommendations to switch over to 100% gas based capacities </li></ul><ul><li>CNG/City Gas </li></ul><ul><li>Environmental concerns driving the growth of the CNG industry </li></ul><ul><li>Clean fuel made mandatory in major cities </li></ul><ul><li>City Gas program a huge success in many cities in India </li></ul>Reforms in other End User Industries Gas to Power <ul><li>Reforms in the end user segments aimed at promoting efficiency in fuel/feedstock </li></ul><ul><li>Gas emerging as the fuel of choice </li></ul>
  22. 22. <ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Industry </li></ul><ul><li>Role of Gas in India’s Power Generation Mix </li></ul><ul><li>Strategies for Overcoming Gas Shortage </li></ul><ul><li>Update on Gas Discoveries and Infrastructure Projects </li></ul>Table of Contents
  23. 23. Overview of Domestic E&P Activities Proven Commercial Productivity Cambay Basin Krishna-Godavari Basin Mahanadi Basin North Agartala Block Barmer Basin Identified Prospects Prospective Basins Source: DGH, India Strategies
  24. 24. Strategies for Overcoming Gas Shortage – Increasing Domestic E&P Activities Blocks Awarded under Pre-NELP & NELP <ul><li>NELP VII Bidding Round to Likely to Commence in November/December 2007 </li></ul><ul><li>Nearly 25 blocks — each block with 5,000 sq km to 9,000 sq km — would be thrown open under the NELP-VII bid </li></ul>Source: DGH, India Strategies 20 20 10 0 10 2003 NELP-IV 20 20 6 2 12 2005 NELP-V 52 52 21 6 25 2006 NELP-VI 23 23 9 6 8 2002 NELP-III 18 23 8 8 7 2000 NELP-II 20 24 7 16 1 1999 NELP-I 17 28 0 11 17 Prior to 1999 Pre-NELP Currently Under Operation Total Awarded Deep Water Shallow Offshore Onland Year Round
  25. 25. 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 Strategies OIL: Oil India Limited, ONGC: Oil & Natural Gas Corporation Limited, PVT/JV: Private/Joint Venture
  26. 26. Increasing LNG Imports 1 MMTPA ~ 1.34 BCM Source: GAIL Strategies 25.00 8.70 Total LNG Supply (MMTPA) 2.50 - Mangalore 5.00 - Kochi 5.00 1.20 Dabhol 2.50 2.50 Hazira 10.00 5.00 Dahej 2011 - 2012 Capacity (in MMTPA) 2007 - 2008 Capacity (in MMTPA) LNG Terminal
  27. 27. Exploiting Coal Bed Methane Reserves Coal Bed Methane Production Begins <ul><li>Great Eastern Energy Corp Ltd currently has about two dozen wells in West Bengal and plans to drill 300 more over the coming years </li></ul><ul><li>India’s CBM reserves estimated at 16TCF </li></ul><ul><li>26 blocks awarded under 3 CBM rounds </li></ul><ul><li>India’s Directorate General of Hydrocarbons has approved the drilling of more than 100 CBM wells that over the next four years will involve total investments of $150 million. </li></ul>Source: DGH, India Strategies 1TCM=35.3TCF
  28. 28. Exploiting other Gas Sources Strategies Insitu coal/Lignite gasification Gas Hydrates <ul><li>Estimated potential placed at 1894 TCM of gas from gas hydrates </li></ul>Surface coal gasification <ul><li>GAIL MoU with the Canadian company as technology partner for underground coal/lignite gasification projects </li></ul><ul><li>ONGC MoU with Russian University </li></ul><ul><li>Focus Areas – 5 States </li></ul><ul><li>Gujarat, Rajasthan, Tamil Nadu, Andhra Pradesh and West Bengal </li></ul><ul><li>ONGC MoU with Shell. </li></ul><ul><li>GAIL and ONGC plan to use Shell Technology for surface coal gasification </li></ul><ul><li>Likely locations for Pilot plants: Gujarat, West Bengal and Orissa </li></ul>
  29. 29. Imports - Gas Sources for India Strategies Source: Frost & Sullivan IRAN: 28.3 TCM MYANMAR: 0.54 TCM AUSTRALIA: 2.61 TCM QATAR: 25.36 TCM TURKMENISTAN: 2.86 TCM SAUDI ARABIA: 7.07 TCM ABU DHABI: 5.96 TCM 1TCM=35.3TCF Turkmenistan-Afghanistan-Pakistan Pipeline Iran-Pakistan-India Pipeline Myanmar-Bangladesh-India Pipeline
  30. 30. <ul><li>Natural Gas Supply and Demand Trends in India </li></ul><ul><li>Gas Sector Policies and their Impact on the Industry </li></ul><ul><li>Role of Gas in India’s Power Generation Mix </li></ul><ul><li>Strategies for Overcoming Gas Shortage </li></ul><ul><li>Update on Gas Discoveries and Infrastructure Projects </li></ul>Table of Contents
  31. 31. Gas Discoveries in India Discoveries Krishna Godavari Basin ONGC Uppidi-1 KG-DWN-A-1 KG-DWN-E-1 KG-DWN-U-1 KG-DWN-W-1 Reliance Dhirubhai 1 & 3 D6 Rajasthan Focus Energy – SGL1 Mahanadi Basin MDW-4A Source: Frost & Sullivan North Agartala Kunjaban-2
  32. 32. <ul><li>Gas Grid </li></ul><ul><li>Planned Pipelines: 8400 Km at an investment of US$ 5 billion </li></ul><ul><li>City Gas Projects </li></ul><ul><li>City Gas projects to be extended to 22 other cities at an investment of US$ 2 billion </li></ul><ul><li>LNG Terminals </li></ul><ul><li>16.25 MMTPA of LNG terminal capacity to be added at an investment of US$ 2 billion </li></ul>Infrastructure Development – Upcoming projects Projects Hyderabad Jamnagar New Delhi Chennai Ennore Kochi Bangalore Mangalore Dabhol Kolkata Planned Pipelines Bhopal LNG Terminals to be functional 2009-2012 Source: Frost & Sullivan
  33. 33. <ul><li>Field Surveys </li></ul><ul><li>Drilling equipment and services </li></ul><ul><li>Well assessment </li></ul><ul><li>Production Platforms supply </li></ul><ul><li>Support and Maintenance services for Development projects </li></ul><ul><li>Pipelines </li></ul><ul><li>LNG import terminals and Re-gasification plants </li></ul><ul><li>Offshore Supply Vessels (Diving Support Vessels, ROV Support Vessels, Pipe-laying vessels) </li></ul><ul><li>Equipment supply (Turbo-machinery, etc) </li></ul><ul><li>Gas to Power (Gas power plants) </li></ul>Opportunities in Gas E&P and Infrastructure Development projects Opportunities Equipment Supply (Drilling, Turbo-machinery, etc) and Services Offshore Supply Vessels Offshore Support and Maintenance Services Best Opportunities

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