LNG (Liquefied Natural Gas) in India

LNG In IndiaLiquefied Natural Gas

Industry Information Insights 2014

Table of Contents

Introduction

LNG Value Chain

Global LNG Scenario

LNG Terminals

LNG Imports

Prices of LNG

LNG Contracts

Introduction

Natural Gas consists mainly of methane and small amounts of ethane, propane and butane. Itis transported through pipelines but is extremely bulky. A high-pressure gas pipeline cantransport in a day only about one-fifth of the energy that can be transported through an oilpipeline.

Liquefied Natural Gas (LNG) is a response to the inefficiency of natural gas pipelines andthe technical and economic problems of running pipelines over long distances.

If natural gas is cooled at minus 160.5°C at atmospheric pressure, it becomes liquid and morecompact, occupying just 1/600th of the gaseous volume. This is because most of the heavierhydrocarbons are removed during liquefaction.

The cargo that is transported in bulk by sea is predominantly methane (over 80%). Methane isa colorless, odorless, and transparent liquid which is non-toxic, non-corrosive and less densethan water.

LNG Value Chain

The LNG value chain consists of exploration and production from the gas field, liquefaction,shipping, re-gasification and storage.

Global LNG Scenario

In spite of growing interest in LNG across the world, in 2012, LNG trade declined marginally

due to supply-side problems. The demand for LNG, however, remained strong, especially in

light of the nuclear shutdown in Japan and the resulting increased demand for LNG by

buyers to bridge the power-generation deficit. During 2012, the total global LNG trade was

236 MMTPA.

Global LNG Suppliers

Qatar is the largest LNG producer in the world. Malaysia, Nigeria, Yemen and Australia areother LNG suppliers.

Pluto project in Western Australia was the only LNG project commissioned in 2012. It startedLNG supplies in May 2012.

Global LNG Demand

LNG demand in Asia increased to 170 million tonnes in 2012, 13 million tonnes higher than2011. This was largely driven by Japan, which received record imports of 87 million tonnes.LNG imported by Japan is used to bridge the power deficit caused by the nuclear shutdowndue to safety concerns after the March 2011 earthquake.

India is the fourth largest LNG importer in the world.

LNG Terminals

Four Re-gasification Liquefied Natural Gas (R-LNG) terminals exist in India, located at Dahej,Gujarat (of PLL), Hazira, Gujarat (of Hazira LNG Pvt. Ltd) and Dabhol, Maharashtra (ofGAIL (India) Ltd) and Kochi, Kerela (of PLL).

Decision to set up R-LNG terminals is taken by companies based on techno-commercialconsiderations. Many other R-LNG projects, both on the West and the East coast, are atconceptual stage.

The regasification capacity of existing Dahej terminal is proposed to be increased frompresent 10 Million Tones Per Annum (MMTPA) to 15 MMTPA by 2015-16 and that of HaziraLNG Pvt. Ltd. (HLPL) from 3.6 MMPTA to 5 MMTPA by 2015-16.

LNG Terminals in India

GAIL is also planning to set up Floating Storage and Regasification Unit (FSRU) on the EastCoast of India at Kakinada in Andhra Pradesh. Indian Oil Corporation Ltd. (IOCL) is in theprocess of setting up of 5 MMTPA LNG terminal at Ennore which is scheduled to becommissioned by 2015-16.

LNG Terminal Stakeholder Capacity (MTPA)

Dahej Petronet LNG 10.0

Kochi Petronet LNG 5.0

Hazira Shell 3.6

Dabhol Ratnagiri Gas & Power 1.2

Dahej LNG Terminal

Dahej LNG Terminal is South East Asia's first LNG Receiving and Regasification Terminalwith an original nameplate capacity of 5 MMTPA at Dahej, Gujarat.

The infrastructure was developed in the shortest possible time and at a benchmark cost. Thecapacity of the terminal has been expanded to 10 MMTPA and the same has beencommissioned in June, 2009.

The expansion involved construction of two additional LNG storage tanks and othervaporization facilities.

PLL has also initiated the process for setting-up a second LNG Jetty at Dahej. The secondLNG Jetty is required for risk mitigation as well as to berth the higher capacity Q-Max and Q-Flex LNG vessels.

Hazira LNG Terminal

Hazira is a partnership between Shell Gas B.V and Total Gaz Electricité Holdings France.Both the Shareholders represent two of the largest private LNG suppliers in the world. Shelland Total have a shareholding of 74% and 26% respectively in each of the companies thatcomprise the Hazira LNG Terminal and Port project and are collectively known as HaziraGroup Companies (HGC).

Hazira LNG terminal was commissioned on 16 April, 2005. It is India’s first LNG terminal bya global energy company.

The terminal has a jetty where LNG cargo is unloaded through to the cryogenic tanks. LNG isstored in the tanks at -160°C and pumped out of the tank for sending out to customers afterregasification.

A 12.5 Km, 28 inch pipeline transports high pressure gas to the Hazira Mora MeteringStation. It is interconnected to GAIL, GSPL and RGTIL pipelines at Mora.

LNG Imports

Liquefied Natural Gas (LNG) is imported into India under term contracts and on spot/shortterm basis from Qatar, Nigeria, Algeria, Spain, Egypt, France, Yemen, Brunei, Abu Dhabi,Oman, Equatorial Guinea, Norway, Trinidad & Tobago, USA, Australia, Malaysia.

Import of LNG in India started in 2003-04 after setting up of Dahej LNG Terminal. Withincrease in regasification terminals, LNG import in India is gradually increasing.

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LNG Imports

Prices of LNG

The price of LNG imported under the term contracts is governed by the Sale & PurchaseAgreement (SPA) between the LNG seller and buyer. Spot cargoes are purchased on mutuallyagreeable commercial terms.

The long term LNG prices in Asia pacific market are linked to Japanese Crude Cocktail (JCC)as Japan is the largest and oldest importer of LNG in the world.

The Japan Customs-cleared Crude (JCC) is the average price of customs-cleared crude oilimports into Japan.

The average import price of Liquefied Natural Gas (LNG) imported ranges between US$8.75/MMBTU to US$ 16.50/MMBTU.

LNG Contracts

GAIL

GAIL has signed a long-term contract with Sabine Pass Liquefaction LLC, US for import of3.5 MMTPA of LNG for 20 years which may also include shale gas on FoB basis from 2018-19.

GAIL has entered into medium term contract with Marubeni for 0.25 MMTPA of LNGquantities, and supplies have already commenced.

PLL

PLL has sourced 7.5 MMTPA hrough Long Term Contract with RasGas, Qatar with back toback sales arrangement with GAIL, IOCL & BPCL.

PLL has entered into a 20 year contract with Mobil Australia Resources Company Pty. Ltd.from its Gorgon project in Australia for supply of 1.44 MMTPA of natural gas, to commencefrom 2014.

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