Energy Mart 2004 1 FUEL OPTIONS FOR POWER SECTOR PLANNING AND LOGISTICS FOR NATURAL GAS Dr. S.C. Sharma PETRONET LNG LIMITED NEW DELHI-INDIA 21 st January,

1Energy Mart 2004

FUEL OPTIONS FOR POWER FUEL OPTIONS FOR POWER SECTOR PLANNING AND LOGISTICS SECTOR PLANNING AND LOGISTICS

FOR NATURAL GASFOR NATURAL GAS

Dr. S.C. SharmaDr. S.C. SharmaPETRONET LNG LIMITEDPETRONET LNG LIMITED

NEW DELHI-INDIANEW DELHI-INDIA2121stst January, 2004 January, 2004

2Energy Mart 2004

OVERVIEWOVERVIEW

INDIA’S ENERGY REQUIREMENTINDIA’S ENERGY REQUIREMENT GAS A PREFERRED FUEL FOR POWERGAS A PREFERRED FUEL FOR POWER PLANNING FOR GAS DEVELOPMENTPLANNING FOR GAS DEVELOPMENT LNG IMPORTSLNG IMPORTS PETRONET LNG LIMITEDPETRONET LNG LIMITED CREATING GAS TRANSPORTATIONCREATING GAS TRANSPORTATION ISSUES AND CHALLENGESISSUES AND CHALLENGES CONCLUSIONCONCLUSION

3Energy Mart 2004

INDIA’S ENERGY INDIA’S ENERGY REQUIREMENTREQUIREMENT

4Energy Mart 2004

WORLD ENERGY OUTLOOK WORLD ENERGY OUTLOOK 20252025

SHARE OF NATURAL GASSHARE OF NATURAL GAS

World energy demand to grow at 1.8%.

Natural Gas consumption to grow at 2.8%.

Gas consumption for developing Asia at 6.1%.

Growing Share of LNG New technologies to cut

costs Liquefaction Shipping Regasification terminal

LNG to compete with piped gas.

0

51015

202530

3540

1990 2001 2010 2020 2025

Oil N. Gas Coal Others Nuclear

5Energy Mart 2004

WORLD ELECTRICITY WORLD ELECTRICITY CONSUMPTION GROWTH (BUs)CONSUMPTION GROWTH (BUs)

Region 2005 2010 2015 2020 2025 Avg % change/yr 2001-25

Industrialized countries

8307 9200 10106 11030 11994 1.7

Dev. Countries 4886 5962 7172 8555 10038 3.5

Dev. Asia 3103 3851 4697 5634 6604 3.7

China 1545 1966 2428 2986 3596 4.3

India 528 662 802 958 1104 3.4

S. Korea 296 372 443 498 552 3.0

Other Dev. Asia 734 850 1024 1192 1352 3.1

Cent.& S America 782 925 1081 1302 1577 3.3

Total World 14960 17144 19482 22009 24673 2.4

Source : International Energy Outlook-2003

6Energy Mart 2004

ENERGY OUTLOOK FOR INDIAENERGY OUTLOOK FOR INDIA

Large Requirement to fuel economic growth

Energy consumption to grow at 3.2%

Highest growth projected for gas sector

Growth of 6.1% for gas demand

Demand of coal to grow at 2.6%

Oil demand growth at 4% Energy/GDP elasticity at

0.61 Large scope for efficient

utilization of energy.

320 355426

506595

690

0

100

200

300

400

500

600

700

2001 2005 2010 2015 2020 2025

MMTOE

Source: International Energy Outlook 2003

7Energy Mart 2004

FUELS FOR POWER GENERATIONCoal & Natural Gas

Coal production growth at 2% to increase from current 360 MMTPA to 580 MMTPA by 2025.

Natural gas demand growth at 6.1% from current level of 30 BCM to 96 BCM.

Environment protection major driver for large scale gas use.

360 382431 472 510

580

0

100

200

300

400

500

600

2001 2005 2010 2015 2020 2025

Coal Demand.(MMTOE)

Source: International Energy Outlook 2003

2337

5171

88 96

0102030405060708090

100

2001 2005 2010 2015 2020 2025

Gas Demand (MMTOE)

8Energy Mart 2004

PLANNING FOR NATURAL PLANNING FOR NATURAL GASGAS

New Exploration Licensing policy

Large discoveries of gas made

Dahej terminal by Dec.2003 LNG terminal by Shell at

Hazira Revival of Dabhol Kochi LNG terminal Replacing liquid fuels by

gas CNG in transport sector

9Energy Mart 2004

SOURCING NATURAL GAS TO SOURCING NATURAL GAS TO INDIAINDIA

Blocks awarded for exploration Pipeline gas import projects

under consideration.Iran-IndiaBangladesh-IndiaTurkmenistan-Pakistan-IndiaMyanmar-India

LNG import at peninsular locations

Dahej Cochin MangaloreHaziraKakinadaEnnoreMangalore

Cochin

Dahej

Assam

BAY OF BENGALARABIANSEA

.

Ennore

Kakinada

Iran India

Pipeline

Bdesh India

Pipeline

Mangalore

Hazira

10Energy Mart 2004

CREATING GAS IMPORT CREATING GAS IMPORT INFRASTRUCTUREINFRASTRUCTURE

LNG Terminal Capacity (MMTPA)

Dahej 5

Dahej Exp 5

Kochi 2.5

Shell Hazira 2.5

Dabhol 2.5

Mangalore 5.0

Kakinada 2.5

Total 25

About 22.5 MMTPA of LNG by next 5 - 10 years

11Energy Mart 2004

NATURAL GAS FOR POWER NATURAL GAS FOR POWER SECTORSECTOR

– Low gestation period

– Lower capital cost compare to coal base plant.

– 56% guaranteed gas turbine efficiency.

– Cheaper peak load power generation.

– Committed supply for power plant life cycle.

– Utilization of cold energy from LNG to enhance efficiency by 3 to 4%

– Natural gas is the most viable source to meet the power demand

12Energy Mart 2004

POWER GENERATION POWER GENERATION CAPACITY ADDITION(MW)CAPACITY ADDITION(MW)

0

10000

20000

30000

40000

50000

8th plan 9th plan 10th plan

Planned Achieved

Cap

acit

y (M

W)

•Fuel Supply – Major constrain for power capacity addition•Power capacity addition target achieved at •About 50% level in 8th & 9th plan

13Energy Mart 2004

WHY LNG /GAS IMPORTS TO WHY LNG /GAS IMPORTS TO INDIA ?INDIA ?

Large emerging demand Location advantage Environment concerns Imported Crude prices Lower share of natural gas Use of liquid fuels by gas based

industries Focus on shifting from

LPG/kerosene to gas Plan to replace 20% liquid fuels

by gas

India imports about 90 MMTPA of crude oil, 20% of of liquid products replaced by LNG can result in saving of 1.5 to 2.0 billion US$ on import of crude oil.

14Energy Mart 2004

PETRONET DAHEJ LNG PETRONET DAHEJ LNG TERMINALTERMINAL

15Energy Mart 2004

PETRONET LNG LIMITEDPETRONET LNG LIMITED

Petronet LNG Limited promoted by large Indian NOCs

Developing LNG terminals at coastal locations

Petronet developing LNG terminal with JV partners in Southern India.

Equity structure of Petronet is – 50% PSUs – 20% GDF and RasGas– 30% Banks, FIIs, ADB, IDFC

Facilitate growth of power & fertilizer sector

Dahej terminal designed to optimize facilities to minimize the costs

16Energy Mart 2004

Supplier selected through ICB process – first time in the world.

LNG SPA signed on 31st July 1999.

Salient features of the SPA•Quantity: 7.5 MMTPA (FOB basis)•Term : 25 years•supply : December2003 (Dahej) / 2006-07 (Kochi)

• RasGas is building 4.7 MMTPA of liquefaction Train

• Biggest single LNG train.

LNG SUPPLY TIE UP LNG SUPPLY TIE UP WITH RASGASWITH RASGAS

17Energy Mart 2004

DAHEJ LNG TERMINALDAHEJ LNG TERMINAL11ss LNG TO INDIA LNG TO INDIA

Project chain in place project mechanically

completed First ship to arrive on

29th January All agreements in place Initial supply to existing

consumers Replace crude oil &

products Capacity upgradation of

Dahej to 10 MMTPA.

18Energy Mart 2004

LNG TANKS & LNG TANKS & VAPOURAISERS-DAHEJ VAPOURAISERS-DAHEJ

19Energy Mart 2004

VIEW OF JETTY-DAHEJ TERMINALVIEW OF JETTY-DAHEJ TERMINAL

20Energy Mart 2004

CONTROL ROOM-DAHEJ TERMINALCONTROL ROOM-DAHEJ TERMINAL

21Energy Mart 2004

UNLOADING ARMS & JETTY-DAHEJUNLOADING ARMS & JETTY-DAHEJ

22Energy Mart 2004

LNG UNLOADING ARMS-DAHEJ LNG UNLOADING ARMS-DAHEJ

23Energy Mart 2004

Gas Transportation System in India

Major cross country grid

Local state grid

Local CNG Grid

Private Companies

South Gujarat

North Gujarat

K G Basin

Cauvery Basin

Assam

Mumbai

Delhi

GujaratHBJ Pipeline

GAS SUPPLY LOGISTICS GAS SUPPLY LOGISTICS INDIAINDIA

24Energy Mart 2004

INFRASTRUCTURE FOR INFRASTRUCTURE FOR LNG/GAS TRANSPORTATIONLNG/GAS TRANSPORTATION

HBJ pipeline up-gradation to accommodate LNG volumes from Dahej LNG terminal

HBJ capacity enhancement by 23 MMSCMD for Dahej LNG.

Pipeline from Dahej to Uran for LNG supply by Dec.2004

Upgrading pipeline network in Gujarat

Extension of HBJ to further northern states

National gas grid planned to connect LNG terminals, gas producing areas.

National Gas Grid

LNG Demand Areas

25Energy Mart 2004

MARKET FOR MARKET FOR LNGLNG

26Energy Mart 2004

MARKETING OF LNG FROM MARKETING OF LNG FROM DAHEJ TERMINALDAHEJ TERMINAL

LNG from Dahej project will cater to

–Gujarat consumers

–HBJ consumers

–Uran consumers.LNG to be used in refineriesLNG for CNG as a transport fuelLNG for shortfall consumers.

27Energy Mart 2004

MARKETING OF LNG FROM MARKETING OF LNG FROM DAHEJ PROJECTDAHEJ PROJECT

Requirement of LNG for refineries.

Others by GSPL & C2/C3/C4 extraction– IOC using LNG for 3

refineries– BPCL for Mumbai refinery– HPCL for Mumbai refinery– GSPL requested 1 MMTPA

LNG allocations.– C2/C3/C4 extraction – Deficit consumers – 27

MMSCMD

Target Consumers Total Shortfall (MMSCMD)

Shortfall in South Gujarat

3.75

Shortfall along HBJ 8.25

Naphtha to LNG Switchover (Fertilizer + Power)

8.40

Shortfall in Uran (Mumbai)

7.05

Total Requirement 27.05

28Energy Mart 2004

NATURAL GSREQUIREMENT FOR NATURAL GSREQUIREMENT FOR CNGCNG

CNG fastest growing market due to environment concerns

Currently about 160 CNG filling stations

175,000 Vehicles on CNG Program to implement CNG in

other major cities like Kanpur, Lucknow, Ahmedabad, Vadodara, Faridabad & Hyderabad.

Large incentive on cost of fuel using

CNG Conversion potential of 1.47 million vehicles assessed in Mumbai & Delhi itself

20% replacement will require 10 MMTPA of natural gas/LNG.

29Energy Mart 2004

PRICING OF NATURAL GASPRICING OF NATURAL GAS

Price of domestic gas currently controlled by Government

Gas price revision under consideration. Gas prices moving towards market parity. PLL had made facilities on most competitive terms. Price most competitive for new power capacity. Affordable for fertilizer capacity creation. Very high affordability for liquid fuel based fertilizer

plants. High affordability to replace MS / diesel / naphtha / FO

in transport, domestic, fertiliser and other industries.

30Energy Mart 2004

COST OF POWER WITH LNGCOST OF POWER WITH LNG

Fixed charges Rs/kwh

Variable Charges Rs/kwh

Total cost

Rs/kwh

Existing Gas based projects

LNG Price $/MMBTU

4.0$ / MMBTU

New Projects

LNG Price 4.25$ / MMBTU

Project-Imported Coal-New

0.60*

0.90*

1.25

1.35

1.35

1.25

1.95

2.25

2.50

*Average fixed charges for all the gas based projects HBJ/Gujarat*Fixed charges for new gas based project

Natural gas a viable fuel for power etc.

Higher combined cycle efficiencies

Facilitating peak load power

Lower emissions

31Energy Mart 2004

ISSUESISSUES

•Dismantling of Administered prices in phases

• Setting up of Petroleum Regulatory Board

• Introduction of Open Access principle

• Framework of Transportation Tariff

• Unbundling of Transportation and distribution

• Multiple producer prices

• Distance based transmission tariff

32Energy Mart 2004

THANKSTHANKS

DISHA TO PROVIDE RIGHT FUEL FOR LARGE DISHA TO PROVIDE RIGHT FUEL FOR LARGE SCALE POWER DEVELOPMENT IN INDIASCALE POWER DEVELOPMENT IN INDIA