Value through partnerships: LNG market in Asia

Value through Partnerships:

LNG Market in Asia

World LNG Summit, Paris

November 19, 2013

• LNG Outlook

• Challenges For Asia

• India’s Gas Sector – Snapshot

• Value through Partnerships

CONTENTS

LNG Outlook

Distribution of Proved Gas Reserves

92% 92% 92%

8% 8% 8%

0%

20%

40%

60%

80%

100%

1992 2002 2012

Asia Pacific

Rest of the World

BP Statistical Review 2013

Source: Exxon Mobil – An Outlook for Energy : A view to 2040

Regional Imbalances in Asia-Pacific :

Imports Rising

World LNG Market (2011-12)

Source: IGU LNG Report

-20

20

60

100

140

180

Europe Asia-Pacific Middle-East

NorthAmerica

SouthAmerica

2011 65.7 153 3.6 11.8 7.3

2012 51.1 166.6 3.4 9.4 10.7

MM

TPA

LNG Consumption by Region, 2011-2012

Demand for LNG almost doubling over the next decade.

Asian LNG Demand Remains Robust

Demand and Prices have No Correlation

Asia pays the highest price for gas

Accounts for 71% of LNG demand

New LNG Market reality: Rise of

new suppliers and consumers

India, China, Korea, Japan tied-up

LNG indexed to HH from USA

Market needs new price models to

sustain growth of LNG industry

Challenges for Asia

9

Asian Market – as it is today

There are three major regional markets

Their own specificities and own ways of pricing gas with very

large variations in price

Gas has 11% share in the energy mix vs 24% global average

Gas consumption is largely thru LNG import

Though Asia accounted for 71% of global LNG consumption in

2012, it still continues to pay the highest price

India and China represented a combined 12% market share in

2012

The growing appetite for LNG in India and China resulted in

7.7% & 12.2% growth in 2012 (YoY basis)

Challenges for Asian Market

a) Lack of adequate infrastructure particularly cross-

border gas pipelines

b) No ‘gas to gas’ competition

c) LNG prices are still linked to oil prices

d) Despite large volume of gas consumption, Trading

Hub and regional Index are missing in Asia-Pacific

region

e) Absence of trading hubs is keeping Asian gas

prices very high vis-à-vis North America and

Europe

• Regional Cooperation among Asian Buyers is of prime

importance to face the challenges

India’s Gas Sector - Snapshot

1

2

36%

8%

49%

1% 6%

2000

26 bcm

300 bcm

30%

9% 53%

1% 5%

2012

54 bcm

India’s Energy Mix – Gas Rising

Natural gas ~10% of India’s energy mix

Expected to reach 20% by 2030

LNG Imports

0%

20%

40%

60%

% Share of LNG in Total Supply

India’s Challenges and Strategies

• National Gas Grid- Shaping up rapidly, to be ready by 2017 (PAN Indian

presence with pipeline network of 31,000km)

• End-use reforms to address price sensitivity and affordability

• Building enhanced LNG import capacity

(20 MMTPA in 2013 to 35 MMTPA by 2017)

• Contract new LNG at competitive prices and conditions

• Develop a portfolio of equity assets in LNG and upstream in

USA/Africa etc.

• Develop capacity and capability to create and maintain infrastructure

• Attract required investments

JAGDISHPUR

PHOOLPUR

BHATINDA

BAREILLY

DISPUR

DELHI

AGARTALA

BARODA

LUCKNOW

PATNA

AHMEDABAD

RAJKOT

KOTA

MATHANIA

GWALIOR

UJJAIN

AGRA

KOLKATA

GAYA

BOKARO

VARANASI JHANSI

DAHEJ I & II

10 mmtpa

COIMBATORE

MUMBAI BHUBANESHWAR

KRISHNAPATNAM

NELLORE

BANGALORE

KOLHAPUR

SOLAPUR KAKINADA

VIJAYAWADA

DABHOL

5 mmtpa

KANJIKKOD

AURAIYA

GOA

CUTTACK

VIJAYPUR

KANPUR

NANGAL

GURGAUN

PUNE

BHARUCH

SURAT

HYDERABAD

RAJAMUNDRY

BHOPAL

BARMER

Hisar

Jhajjarr

EWPL

KOCHI

5 mmtpa

Haldia-

Jagdhispur P/L

CHENNAI

TUTICORIN

TIRUCHCHIRAPALLI

DAMRA

JABALPUR

BHILAI

JAISALMER

TAPI P/L From

Pakistan

Surat Paradip P/L

HAZIRA

3.6 mmtpa

Gas Infrastructure

LNG terminal 2013-14 2014-15 2015-16 2016-17 13th Plan

Dahej 12.5 12.5 15 15 15

HLPL Hazira 5.0 5.0 7.50 10 10

Dabhol 1.2 1.2 5 5 5

Kochi 5 5 5 5 10

Ennore 0 0 5 5 5

Mundra 0 0 5 5 10

FSRU / East Coast - - - 5 15

Total Capacity (MMTPA)

23.3 23.3 42.5 50 70

Total Capacity (MMSCMD)

88 88 153 180 252

Regasification Capacity

Sufficient Re-gas and Pipeline Capacity available to import LNG

Partnerships Avenues in Asia

Partnerships Potential outcomes

Vertical

integration Cross-border

pipelines ▪ Asian grid linking Central Asia, ME, India, SEA, China

LNG ▪ Traditional : Greater stability & certainty

▪ HH Indexed : for demand in core sectors

▪ New Sources : for new markets

(Africa)

Downstream

integration

▪ Downstream investments by suppliers in power, petchem

Horizontal

alliances

Trading platforms ▪ Asian gas price index de-linked from crude

▪ Asian gas trading hub to enable greater liquidity

Joint project

development ▪ Cross-equity holdings in liquefaction and regas

Technology

alliances

FLNG / FSRU ▪ Joint Participation in FLNG / FSRU

Shale gas/CBM ▪ Unconventional production (esp. in China)

Source: GAIL, McKinsey

Cntd…

• Joint acquisition of assets in Canada, Africa, Latin America etc.

• Swapping of LNG volumes to reduce and optimise shipping costs

• Knowledge sharing in areas related to CBM, Shale Gas,

UCG projects, gas exploration, pipelines etc.

Business Partnerships

GAIL – The Partner of Choice

• India’s Premier Integrated Natural Gas Company since 1984

• 57%+ Government of India stake

• 17%+ CAGR in 10 Year Turnover, 9%+ CAGR in 10 Year PAT

• Turnover of $8.6 billion and PAT of $731 million (2012-13)

• Strong presence in International Sourcing & Gas Trading, Pipeline

transmission, Petrochemicals, Liquid Hydrocarbons & Gas Processing,

E&P, City Gas Distribution, LNG terminals

• Global footprints in USA, Singapore, China, Myanmar, Egypt

• ~4000 Manpower Asset

• India’s No. 1 Gas Company

Conclusion

Greater collaboration between all stake holders to unlock potential of LNG

industry.

Creating partnership between LNG Buyers/Suppliers in Asia on price and

investment.

Promote dialogue and consensus through an Asian Cooperation

Forum

Need to be flexible and explore new avenues that can create value.

GAIL is a Preferred and Low-Risk Indian Partner for Investments in LNG

Supply Chain

Partnerships – The Prime Imperative

Thank You