Future Potential for LNG Terminals in the Indian Sub-Continent

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Future Potential for LNG Terminals in the Indian Sub-Continent

  1. 1. 3rd Asia Energy Security Summit 2013Future Potential for LNG Terminals in the Indian Sub-Continent Presented by Proshanto Banerjee Bangkok February 28, 2013
  2. 2. Presentation Overview ― Why Natural Gas ― Current demand and production of natural gas in the Indian sub- continent ― Future demand and production of natural gas in the Indian sub- continent ― LNG and domestic gas pricing ― LNG Import capacity in the Indian sub-continent ― Near to mid term strategy for LNG import
  3. 3. Primary energy profile of the Indian sub continent 600 Oil Natural gas Coal 500 Nuclear energy Hydro electricity Renewables 400MTOE 300 200 100 0 India Pakistan Bangladesh Sri Lanka Source : BP Statistical Review 2011
  4. 4. Natural gas has emerged as a preferredsource of energy― Clean fuel with lesser environment impact― Abundantly available in recoverable form― Affordable compared to crude oil based products― Proven technological advancements― Globalization of trade
  5. 5. Consumption of Natural Gas in the Indian sub continent in 2011 70 61.1 60 50 39.2 40 BCM 30 19.9 20 10 0 0 India Pakistan Bangladesh Sri LankaSource : BP Statistical Review 2011
  6. 6. Production of Natural Gas in the Indian sub continent in 2011 80 69.15 70 Domestic Supply Demand 60 54.88 50 46.1 39.2 BCM 40 29.85 30 19.9 20 10 0 1.5 0 India Pakistan Bangladesh Sri LankaSource : BP Statistical Review 2011
  7. 7. Demand – Supply scenario of Natural Gas in Bangladesh 90 Demand Production 82 MMSCMD 80 70 Window of Opportunity for LNGMMSCMD Import - 11 MTPA 60 50 49.2 MMSCMD 40 30
  8. 8. Demand – Supply scenario of Natural Gas in Pakistan 300 273 MMSCMD Demand Production 250 200 Window of Opportunity for LNG Import - 58 MMTPAMMSCMD 150 100 50 63 MMSCMD 0
  9. 9. Demand – Supply scenario of Natural Gas in Sri Lanka 16 Production Demand 14 MMSCMD 14 12MMSCMD Window of Opportunity 10 for LNG Import - 2.5 MMTPA 8 6 5 MMSCMD 4 2 0
  10. 10. Demand – Supply scenario of Natural Gas in India 600 550 MMSCMD Demand Production 500 Window of Opportunity for LNG 400 Import - 80 MMTPAMMSCMD 300 260 MMSCMD 200 100 0 Note: Planning Commission of India envisage 70 MMTPA LNG imports by 2022
  11. 11. Demand of Natural Gas in the Indian sub continent by 2030 140 120 100 80BCM 60 40 20 0 India Pakistan Bangladesh Sri Lanka Estimated Sub Continent Shortfall Estimated Gas Demand Anticipated Domestic Production Source : Various State Agencies
  12. 12. Demand of Natural Gas in the Indian sub continent is unlikely to be fully realized Lack of adequate reserves — Lack of a market pricing mechanism — Lack of market reforms in major end consumer sector — Lack of transportation and distribution network — Uneven policy and taxation structureLNG appears to be an immediate solution to meet the increasinggas demand
  13. 13. Global LNG liquefaction capacity Expected to reach a minimum of 70 MMTPA between 2012-15 400 350 300 250MTPA 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2009 2010 2011 2012 2013 2014 2006 2007 2008 2015 APAC Africa Middle East America Europe
  14. 14. Post 2015 - Large capacity additions expectedfrom North America subject to exportpermission in the next two years EIA Scenarios for US Gas Exports
  15. 15. Proposed and Potential LNG Export Projects inNorth America • Given the number of projects that are currently applying for export license, the prospects of LNG export from North America appear to be strong • Export license to non-FTA countries is critical for viability of US export projects • Expected US LNG exports by 2020 are 70 mmtpa, in addition 20-30 mmtpa of LNG exports could come from Canada
  16. 16. Huge arbitrage opportunity exists between Henry Hub and JCC linked pricing 15 Japan European UK US Canada 12 ~ $ 11/MMBtu 9$/MMBtu 6 3 0 1992 1984 1985 1986 1987 1988 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source : BP Statistical Review 2012
  17. 17. Future Outlook – Gas index/LNG Prices 20 Crude Oil Parity Price (JCC) 18 20 20 20 20 PLL Qatar (12.7 % JCC) 20 16 Crude Oil Parity Price (JCC) Crude Oil Parity Price (JCC) 18 18 PLL Gorgon(14.5 Price (JCC) Crude Oil Parity % JCC ) 18 18 18 14 PLL Qatar (12.7 % JCC) 20 PLL Qatar (12.7 % JCC) PLL Qatar (12.7 % JCC) 16 16 Sellerscomfortable(14.85% % JCC) Willingness (14.85 Seller Oil Parity Price (JCC) 16 16 $/ MMBtu$/ MMBtu MMBtu 16 12 Crude JCC)Gorgon(14.5 % JCC ) PLL PLL Gorgon(14.5 % JCC )) 18 PLL Gorgon(14.5 % JCC Cheniere LNG Deal (Henry Hub 14 14 14 14 14 10 PLL Qatar (12.7 % JCC) Plus) Willingness (14.85% Sellers $/ MMBtu $/ 16 Sellers Willingness (14.85% JCC) JCC) Willingness (14.85% Sellers$/ MMBtu NBP Index (UK) $/ MMBtu 12 12 $/ MMBtu 12 12 12 JCC) JCC) PLL Gorgon(14.5 % JCC ) 8 Cheniere LNG Deal (Henry Hub 14 Cheniere LNG Deal (Henry Hub Plus) 10 10 Henry HubLNG Deal (Henry Hub Cheniere Index Plus) 10 10 10 Plus) Willingness (14.85% Plus) Sellers 6 NBP Index (UK) 12 JCC) Index (UK) NBP Index (UK) NBP 8 8 88 8 Cheniere LNG Deal (Henry Hub 4 Henry Hub Index 10 Plus) Hub Index Henry Hub Index Henry 6 6 66 6 NBP Index (UK) 2 8 4 4 4 4 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 4 Henry Hub Index 6 2 2 22 2 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2012 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 4 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2 2012 2013 2014 and other Public Sources 2019 2020 2021 2022 2023 2024 2025 Source: WEO 2011 2015 2016 2017 2018 Long term LNG prices are expected to mostly depend on Oil indexation and HH Prices
  18. 18. Current domestic price of Natural Gas in the Indian sub continent 4.4 4.2 4.2 4 3.8MMBTU 3.6 3.4 3.2 3.37 3.06 3 India Pakistan Bangladesh
  19. 19. Current average delivered LNG Prices to India 21 18 17.01MMBTU 15 17.77 16.19 12 9.83 9 Australia North America Qatar Russia
  20. 20. LNG import scenario in the Indian sub continent 60 50Capacity (MMTPA) 40 India 30 20 10 0 Existing Under Construction Planned (3 Terminals) (1 Terminal) ( 15 Terminals)
  21. 21. LNG import plan of Bangladesh • The Government plans to build an LNG import terminal at Moheshkhali Island with a capacity of 5 MMTPA • Signed MoU to import 4 MMTPA from Qatar Petroleum in January 2011 • Three bidders short listed to develop an FSRU based import terminal but no headway so far • Recently, the government re- scheduled its target and is in the process of re-tendering or re- negotiating with the short-listed firms
  22. 22. LNG import plan of Pakistan (1/2) • Pakistan’s first LNG policy was introduced in 2006 with private sector participation and without the Government’s physical or financial support • The Government committed to support the projects, if needed, to secure long term LNG supplies but no guarantee was offered • However, the private sector showed little enthusiasm for a highly capital intensive and risk prone business • As a result the government initiated its own parallel LNG import project albeit through Government entity under the name Pakistan Mashal LNG Project (PMLP) in 2005-06
  23. 23. LNG import plan of Pakistan (2/2)• In 2010, the contract for terminal development was awarded to 4GasAsia whereas GDF-Suez was awarded the LNG supply contract. However due to various issues, the project came to a standstill• Recently, Pakistan has been considering to import LNG from Qatar via India• India will receive LNG at one of its west coast terminals and supply gas through a planned pipeline to Pakistan’s border• India has offered to supply 200 million cubic feet per day (mmcfd) of LNG for a period of five years• India plans to expand its natural gas pipeline network across the border. It has already laid a 100 km pipeline to Bhatinda, from where the pipeline will be extended to Wagah bordering with Pakistan
  24. 24. LNG import plan of Sri Lanka • In response to a call for proposals in 2001, the government of Sri Lanka received several proposals for the construction of LNG terminals. However, nothing was heard of these proposals thereafter • The Ministry of Power and Energy had made a previous attempt to obtain LNG from• A terminal of 1.7 MMTPA Iran and an exchange of capacity was planned to be delegations had also taken located in Kandana by Lanka place Transformer Ltd.
  25. 25. Conditions evolving for increased near term availability of LNG for India• Increasing LNG affordability to create interest amongst suppliers – LNG will flow to India where prices are sufficient and quantities can support the necessary infrastructure• Indian LNG import depends on the amount of demand that can accept international market prices• Three views of LNG import levels – Assume only current and developing projects – Assume a substantial expansion of LNG capacity – Plants operate at 70% load factor
  26. 26. Around 21 MMTPA of LNG import capacity is available by 2013 CapacityOperating Terminals Location (MMTPA) Start Date Petronet LNG Dahej I 5 2004 Shell Hazira 3.6 2005 Petronet LNG Dahej II 5 2009 GAIL Dabhol 5 2011 Total Operating Capacity 18.6 Terminals CapacityUnder Construction Location (MMTPA) Start Date Petronet LNG Kochi 2.5 2012-13 Total Under Construction Capacity 2.5
  27. 27. 41 MMTPA of LNG import capacity is in the planning stage CapacityPlanned Terminals Location (MMTPA) Start Date GSPC - Adani Mundra 5 2016-18 Swan Energy Pipavav 3 2016-19 H-Energy Jaigarh 8 2016-17 IOCL Ennore 5 2016-18 Petronet LNG Gangavaram 5 2017-18 GAIL Kakinada 3 2016-18 Shell Kakinada 3 2016-18 IOCL Dhamra 5 2017-18 H- Energy Offshore Digha 4 2016-17 Total Planned Capacity 41India’s total LNG import capacity by 2019 – 62.1 MMTPA
  28. 28. Planned LNG Import Terminals in India Petronet LNG – Dahej Shell – Hazira GAIL – Dabhol GSPC – Mundra Swan Energy – Pipavav H-Energy – Jaigarh Petronet LNG – Kochi IOCL – Ennore Petronet LNG – Gangavaram GAIL – Kakinada IOCL - Dhamra H-Energy – Offshore Digha
  29. 29. India can provide an immediate solution to Pakistan and Bangladesh’s rising gas shortages• Despite all the hurdles and a multitude of various policy initiatives, imports of LNG are expected to be the only path forward for the energy security of Pakistan and Bangladesh in the near to medium term• In the next 3 to 4 years, LNG must be available in these countries to meet the expected gas shortage• The Indian sub continent could learn a lot from the European and US - Canada examples of sharing infrastructure, economics and mitigating risks• For the short term , India can be treated as an LNG importing hub and regasified LNG can be supplied to Bangladesh and Pakistan through onshore pipelines extending across borders
  30. 30. The Indian sub continent could emerge as the next importing hub since………• Additional gas from domestic supply in near term is unlikely• There is significant demand to support LNG price• Increasing demand – supply gap can be compensated only through LNG imports but:⁻ Quantum of LNG imports will depend on the volume of demand that can accept international market prices⁻ Price should be right (especially from Power and Fertilizer industries) to attract LNG players⁻ LNG infrastructure building needs to continue• An integrated LNG souring approach can put the Indian sub- continent players in the commanding position while negotiating the contracts and risks related to market forces
  31. 31. Thank YouFor any Information please contact Proshanto Banerjee at proshanto.banerjee@gmail.com 1

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