2013 Platts, McGraw Hill Financial. All rights reserved.

India LNG; Challenges to and Opportunities for Growth

Stephanie Wilson, Managing Editor, Asia LNG September 02, 2013

Agenda

2

India Opportunities for Gas Growth. Current imports Scope for growth

India Domestic and International Challenges

Price Sensitivity Development of Infrastructure Competing fuels

Spot LNG Market Update

2013; A New Price Curve Emerging

DES West India Methodology and Specification Explained

India;

Opportunities for Gas Growth

India; Opportunities for Gas Growth

4

Fifth largest LNG importer in the world. Fourth largest energy consumer. First LNG in 2004 from Qatar.

Nearly 25% of the 1.24 billion population does not have access to electricity IEA 2012 estimates

Focus on securing energy sources to meet the needs of its growing economy.

Working towards energy independence by 2030; Increased production Unconventional resources (CBM and shale), Foreign acquisitions by domestic Indian companies Reduced subsidies.

India; Opportunities for Gas Growth

5

Alongside China, India will be the engine driving LNG import demand in Asia through 2035

LNG imports forecast to almost five-fold to 234m cm/day (62m mt/year, currently at 50m cm/day) - Finance Minister P Chidambaram

Power and fertilizer sector make up majority of natural gas demand priority sectors

6

India Power Mix (GW)

Coal, 101

Natural Gas, 28.8

Nuclear, 4.8 Hydro, 39.3

2012

Source: India Ministry of Power, World Nuclear Association, BENTEK

Total Installed Capacity: 180.4 GW

7 Source: GIIGNL & BP Statistical Review

Year GIIGNL y-o-y change

(BCM) (%) 2005 5.69 n/a 2006 7.693 35.2 2007 9.789 27.4 2008 10.326 5.3 2009 11.536 11.91 2010 11.19 -3.2 2011 15.64 37.4 2012 16.78 7.7 0

10

20

30

40

50

60

70

Bcm

of G

as

Gas consumptionDomestic productionimportsTotal gas available

Indian demand vs. domestic production

India: LNG Demand Forecast vs. Contract Evolution

8

0

5

10

15

20

25

30

35

40

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Long

-ter

m C

ontr

acts

(MTP

A)

Australia Portfolio QatarRussia U.S.A. Indian DemandForecast Demand

Source: BENTEK

10.8 mtpa of un-contracted demand in 2020

India Power Mix (GW) Forecast

Coal, 181 Natural Gas, 47.4

Nuclear, 14.6 Hydro, 39.3

2017

Total Installed Capacity: 282.4 GW

Gas generation capacity grows 18.6 GW (93%) from 180.4GW in 2012 to 282.4GW

Source: India Ministry of Power, World Nuclear Association, BENTEK

10

Existing Terminals

Hazira

Dahej

Dabhol

Kochi

FACILITY ONLINE CAPACITY OPERATOR SUPPLY SOURCE Dahej 2004 11 mtpa Petronet LNG Qatar

Hazira 2005 2.5 mtpa Shell India

Australia Malaysia Oman Qatar

Dabhol 2012 5 mtpa Ratnagiri Gas and Power Nigeria

Kochi 2013 5 mtpa Petronet LNG Qatar Source: Platts Terminal Tracker Asia, BENTEK

Asian Terminal Capacity

11

Source: Platts Terminal Tracker Asia, BENTEK

0

20

40

60

80

100

120

140

160

180

200

Japan Korea China India

2012 imports

Planned/Proposed

UnderConstruction

Current importcapacity

12

Planned and Proposed Terminals

Hazira

Dahej

Dabhol

Kochi

Gangavaram LNG

Ennore

FACILITY ONLINE CAPACITY OPERATOR SUPPLY SOURCE Dahej 2004 5 mtpa Petronet LNG Qatar

Hazira 2005 2.5 mtpa Shell India

Australia Malaysia Oman Qatar

Dabhol 2012 5 mtpa Ratnagiri Gas and Power Nigeria

Kochi 2013 5 mtpa Petronet LNG Qatar Ennore unknown 5 mtpa Indian Oil Corp TBC Mundra 2016 5 mpta Gujarat state Petroleum Gangavaram LNG 2017 5 mtpa Petronet LNG TBC

Mundra

Source: Platts Terminal Tracker Asia, BENTEK

India;

Domestic and International Challenges

India: LNG Demand vs. Prices

14

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

$/M

MBt

u

LNG

Impo

rts (

met

ric to

ns)

Dabhol Dahej HaziraKochi Regasification Capacity LNG DES West India

Source: BENTEK & Platts data

Key Challenges of Indian Market - Domestic

Large appetite for gas but high price sensitivity. Administered prices continue to hinder development of gas industry.

The Rangarajan Committee Formula

The Committee proposes a formula based on average netback price of Indian term LNG imports, netbacks to Japanese JCC LNG price and the average gas price at HH and NBP.

Effective from 01 April 2014, the formula will be revised each quarter and the calculation will be based on the average price of the 4 quarters with a lag of 1 quarter; e.g; the price in April-July 2014 will take into account the average price for the last 4 quarters in 2013

ONGC; increase of $1/MMBtu on $4.20/MMBtu could add Rupees 20-21 billion post tax profit.

Oil India; increase of $1/MMBtu on $4.20/MMBtu could add Rupees 4 billion net profit

Already a public Interest Litigation (PIL) has filed by opposition politician. Response of Government and Reliance Industries is expected by 6th Sept.

15

Key Challenges of Indian Market - Domestic

Development of infrastructure needed;

LNG terminals

Domestic and transnational pipeline networks

Gas storage

Unbundling of transmission and marketing entities

Competition with alternative fuels and no regulation on burning

5th largest coal reserves in the world

16

Key Challenges of Indian Market - International

Competition from global buyers Japan, South Korea, Taiwan high priced markets New, emerging markets Singapore, Thailand,

Malaysia

China key competitor going forward

17

18

DES West India vs. JKM

Industry news, analysis Market Reports 0

0.5

1

1.5

2

2.5

3

3.5

$/M

MBt

u

Assessment Date

Platts JKM - DES West India Spread

5

10

15

20

25

30

35

40

$/M

MBt

u

Platts JKM VS DES West India Platts DES West India Platts JKM

Source: Platts

Spot LNG;

2013 A New Price Curve Emerging

Global LNG: Imports in 2012

20 Source: GIIGNL

236 million mt

21

H1 2013 vs. H2 2012 Imports

Industry news, analysis Market Reports

Source: BENTEK

0

1000000

2000000

3000000

4000000

5000000

6000000

Brunei Qatar Yemen Algeria Egypt France USA Nigeria

MT

H1 Indian Imports by Supply Source

H1 2012 Imports H1 2013 Imports

22

H1 2013 vs. H2 2012 Imports

Industry news, analysis Market Reports

Source: BENTEK

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Dahej Hazira Dabhol

H1 2013 imports by terminal

Brunei

France

Algeria

Egypt

Yemen

Nigeria

Qatar

Platts JKM Monthly Average

23

2

4

6

8

10

12

14

16

18

20

22

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$/M

MBt

u

2009

2010

2011

2012

2013

Source: Platts

Summer in North Asia

Strips deals and short/mid-term LNG contracts reduced spot demand

UQT (Upward Quantity Tolerance) clauses exercised in existing long-term contracts

Nuke outages in Japan and South Korea

Higher-than-average summer temperatures

24

Platts JKM VS DES West India

25

13

13.5

14

14.5

15

15.5

16

16.5

17

4/16/2013 5/16/2013 6/16/2013 7/16/2013 8/16/2013

$/M

MBt

u

Assessment Date

Platts DES West India Platts JKM

Summer months in North Asia

Jul Jun Aug Sep

Source: Platts

Coming out of summer in North Asia

Zero nuke power generation in Japan by September

Winter strip negotiations with Atlantic players already on-going

New producer Angola LNG

New trader Koch Supply & Trading

26

Key Takeaways

Continues to rely on LNG imports

More investment in infrastructure is required for both domestic and imported gas (both LNG and pipeline).

Proposed NBP/HH/JCC LNG linkage could use review.

Must sign more term contracts if it is to lock in supplies for the end of the decade.

27

DES West India;

Methodology and Specification Explained

Platts LNG assessments cont.

29

Phase 1: DES West India launched

January 8 2010. net forward from FOB ME Phase 2: DES West India stand-alone

assessment launched August 1 2011 same month as current JKM and based on MOC methodology.

How accurate is JKM?

30

Quantitative evaluation of historical JKM vs. actual Japanese customs data

Source: Platts

Thank you

Stephanie Wilson, stephanie.wilson@platts.com

31

Slide Number 1AgendaIndia;India; Opportunities for Gas GrowthIndia; Opportunities for Gas GrowthSlide Number 6Slide Number 7India: LNG Demand Forecast vs. Contract Evolution India Power Mix (GW) ForecastExisting Terminals Asian Terminal CapacityPlanned and Proposed Terminals India;India: LNG Demand vs. PricesKey Challenges of Indian Market - DomesticKey Challenges of Indian Market - DomesticKey Challenges of Indian Market - InternationalDES West India vs. JKMSpot LNG;Global LNG: Imports in 2012H1 2013 vs. H2 2012 ImportsH1 2013 vs. H2 2012 ImportsPlatts JKM Monthly AverageSummer in North AsiaPlatts JKM VS DES West IndiaComing out of summer in North AsiaKey TakeawaysDES West India;Platts LNG assessments cont.How accurate is JKM?Thank you