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F200602024
India’s Energy ChallengeJune 28 & 29, 2006,
Hilton Americas, Houston
Panel Session 3B
LNG/GTL
Amos Avidan
F200602024
Natural Gas - LNG/GTL
• Running out of natural gas?
– Global supply and demand
– India gas market
– Sustainable development
• The Boom in LNG Construction
– How long will it Last?
– Cost, Schedule, Quality and Certainty of Outcome
• Will GTL follow LNG?
F200602024
World primary energy consumption
BP Statistical Survey 2005
Oil
Natural Gas
NuclearhydroCoal
More of the Same…
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Reserves/Production ratios are steady- The role of technology
Natural GasOIL
BP Statistical Survey 2005year
R/P
ye
ars
Consumption, m bbl/d Consumption, bcf/d
80
63
140
259
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Natural Gas in India• Consumption up 12% to 1.3 Tcf in 2005
– Production from Mumbai High– Reliance discovery of KG in 2002
• LNG and pipelines needed to support high growth:– HBJ pipeline capacity and others– LNG terminals at Dahej, Hazira, Dahbol, others– Dahej price is fixed till 2008 ($4.87)– High spot prices curtail
shipments to Hazira
• Import gas pipelines?
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Global Warming Concerns
• Global climate is complex but there is scientific consensus that human activity is causing global warming– CO2 increased from 280 to 370 ppm in the past 200 years
• It’s hard to balance economic growth with CO2 reduction– new technologies can help
• Major CO2 emitters are not bound by Kyoto, but some form of CO2 controls will likely happen
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The Future1. Ecological
disaster?
2. The Fun Future – techno fix?
3. The Ecotopian Solution?
The Future According to Robert Crumb, 1998
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Liquefied Natural Gas
• High LNG demand to continue
– Ample and cost-effective, but remote gas reserves
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0
100
200
300
400
500
600
700
65-70 70-75 75-80 80-85 85-90 90-95 06-1095-00 01-05
$US / ton per annum of capacity
But LNG Construction Costs are Increasing
Range of recent proposals and bids
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Why the increase?
• High cost escalation in the past 3 years
• More complex plants in difficult locations
• Execution problems on some projects
• Several projects being delayed or questioned
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Cost Escalation
• Record high prices for commodities, volatility
• Higher shop loads lead to:
– Quality concerns
– Higher contingencies
– Shorter validity periodsTypical Price increases
from 2003 to 2006
Compressors: 35% Line pipe: 70%
Pumps: 55% Switchgear: 20%
Exchangers: 42% Structural steel: 52%
Columns 52%
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Shop Loads and Lead Times
• Early commitment needed
• Typical Lead times, weeks:
20042005
Air coolers 37 53
Motors 22 45
Columns 38 45
Vessels 40 53
Reactors 38 70
Pumps 25 33
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People Issues Facing the E&C Industry
• Aging workforce
• Retaining talent
• High recruitment
• Salaries are rising
• Training is more critical
• Globalization
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Feasibility FEED EPC
Benefits to the owner:Benefits to the owner: Market advantage Lock up scarce EPC resources Highest NPV Competitive EPC cost Certainty of Outcome
A Negotiated EPC Model
Shorter schedule
Open-book FEED
LSTK or cost plus EPC
Experienced team
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Jamnagar Project Example
• Phase I: 450 TBPD, Integrated Refinery and Petrochemical plant
• Over $4 Billion
• 44 Process Units
• Bechtel Involvement from Project Conception through Operation
• Less than 4 Years to “Oil in”
Reliance Industries Limited
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What About GTL?
• Gas-To-Liquids can produce quality fuels, but at a high cost
• 2006 – Startup of Oryx GTL in Qatar (34 TBD at a cost of over $30,000/bbl)
• Cost of the proposed 140 TBD Pearl GTL project in Qatar could be over $50,000/bbl
• Proposed niche GTL projects:
– Qatar (resource driven)
– Nigeria, Algeria, Russia – stop flaring, enable oil production
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Thank You
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