LNG Infrastructure & Development

K.K. Sinha

Director– Essar Ports Ltd.

2

Chabahar Port

HaziraPort

Gas in Global Energy Basket (2016)

4418, 33%

3204, 24%

3732, 28%

592, 5%910, 7%

420, 3%

Million tonnes oil Equ.

Oil Natural GasCoal Nuclear EnergyHydro Electric Renewables

▪ Natural gas contributes 24% in

world Energy basket

▪ Natural gas contribution is third

behind oil (33%) and coal (28%)

▪ Being cleanest among top three,

natural gas is expected to further

enhance its share

2460, 69%

1083, 31%

Gas Consumption (Domestic v/s Trade)

Gas Domestic Consumption Gas Trade

▪ More than two third of gas is

consumed domestically.

▪ Approx. one third is traded in

the form of gas through

pipelines and in the form of

LNG through ships

▪ Approx. two third of gas is

traded through pipeline primarily

within Europe and North

America

▪ Approx. one third of gas is

traded in the form of LNG

primarily to Japan, Korea, China,

India, Taiwan etc.

737, 68%

346, 32%

Trade Distribution (Pipeline V/s LNG)

Gas Pipeline Trade LNG Trade

Source: BP Statistical Review of World energy

Total: 13.3 Billion TOE

Total: 3,543 BCM Total: 1,083 BCM

Global - Liquefaction and Regasification Infrastructure

340

258

0

50

100

150

200

250

300

350

400

Capacity Demand

Liquefaction Quantity in MMT

795

258

0

100

200

300

400

500

600

700

800

900

Capacity Demand

Regasification Quantity in MMT

340

452

0

50

100

150

200

250

300

350

400

450

500

2016 2022

Proposed Liquefaction Quantity in MMT

▪ Capacity utilization of liquefaction plant is 75%

▪ Additional 112 MMT (35% increase) is expected to

be added by 2022

▪ Regasification capacity utilization is approx. 35%

▪ USA has regasification capacity of 129 MMTPA

and utilization is 1%

▪ 90 MMT of new Regasification capacity is under

construction

Source: IGU 2017 World LNG Report

Gas in India – Overview

213, 30%

412, 57%

45, 6%

9, 1% 29, 4%17, 2%

2016 - MillionTonnes Oil Equivalent in India

Oil Coal Gas Nuclear Hydro Renewable

▪ Natural gas contributes 6% in India

Energy basket while coal and oil

contributes 57% and 30% respectively.

▪ With focus on clean energy, gas share is

expected to increase substantially

▪ Fertilizer, power, refinery, city gas and

petrochemicals are the major user of gas

in India

▪ Gas demand has increased by 8.5% in

FY 17 and 4% in first nine months of FY

18.

▪ Although latent demand is huge, India is

yet to reach the inflexion point of the

faster growth.

Source: BP Statistical Review of World energy June 2017 Source: Crisil

44 42 45 45 40

31 2832 32

30

2019

20 2123

77

7 7 10

1413

14 15 1910

1110

1719

0

20

40

60

80

100

120

140

160

FY14 FY15 FY16 FY 17 FY 18

M

M

S

C

M

D

Sector Wise Natural Gas Demand

Others (Others/LPG/PLconsumption)

Refinery

Petrochemicals

CGD

Power

Fertilisers

126121

127

136 142

Total: 725 Million TOE

Demand and Supply of Natural Gas in India

5

▪ During last 3 years Natural gas demand has

increased from 121 MMSCMD in FY 15 to

142 MMSCMD in FY 18

▪ Domestic production has been stagnant

around 70 MMSCMD

▪ Natural gas import has increased from 48

MMSCMD in FY 15 to 71 MMSCMD in FY

18

73 69 70 71

48 58 6871

0

20

40

60

80

100

120

140

160

FY15 FY16 FY17 FY 18

M

M

S

C

M

D

LNG Consumption

LNG

Domestic

121 127138

142

Source: Crisil

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Chabahar Port

HaziraPort

▪ LNG prices have declined during FY 16 and FY17 with increase in the liquefaction capacity

and decrease in price of crude oil

▪ However, during last few months, price has strengthened due to rise in crude prices

▪ Currently LNG price is at approx. USD 10/MMBTU which is quite high

▪ Currently LNG and Fuel oil are trading at similar prices and only benefit for LNG are benefits

associated with the cleaner fuel

Price sensitivity of LNG

7

Chabahar Port

HaziraPort

Traditional LNG Termimal – Huge investment and long term

commitment from full value chain

▪ Land based terminal with huge investment of ~ USD 700 – 800 Million

▪ Tie up of full value chain – Liquefaction capacity, ships and end user

▪ Beneficial for large scale operations to cater to market size 5 MTPA or more

▪ Important for sectors with fixed demands and capability of long term commitments

▪ Worldwide, 106 land based LNG terminals are operational

New Concept – FSRU and FSU + Land based Regas

▪ LNG ship is used as storage unit instead of development of large tanks on land

▪ Regasification unit is on ship in FSRU and on land in case of FSU

▪ Capex is lower than land based terminal ( ~ USD 400 – 600 Million) for FSRU and USD 200-300 million

for FSU + land based regas

▪ Better option compared to land based terminal if demand is not very high up to 3-4 MMTPA

▪ Breakeven at lower traffic of 1.0 to 2.0 MMTPA

▪ Long term commitment for full value chain is not required beyond the anchor customer

▪ Worldwide, 26 FSRU and one FSU based LNG terminals are operational at present

Floating Storage and Regasification (FSRU) Floating Storage Unit (FSU) and Land based Regasification

9

Chabahar Port

HaziraPort

LNG Regasification infrastructure in India

Location Ownership Stake

Existing

Capacity

(MTPA)

Incremen

tal

Capacity

(MTPA)

Utilisat

ion

Dahej Petronet LNG 100% 15 2.5 97%

HaziraShell Gas B.V. 74%

5 76%Total 26%

Dabhol

GAIL 25.5%

5 (1.6 due to

lack of

breakwater

56.3%

NTPC 25.5%

MSEB and

Financial

institutions

49.0%

Kochi Petronet LNG 100% 5 ~ 5 %

Total 26.6 2.5

▪ Currently, India has approx. 27 MTPA of

regasification capacity from Petronet

Dahej, Petronet Kochi, RGPPL Dabhol &

Shell – Total Hazira import terminals

Location Ownership Capacity in

Phases I

Expected

Commissioning

Mundra GSPC and Adani Port 5 2018

Ennore IOCL 5 2018

ChharaHPCL and Shapoorji

Pallonji Group5 2021

DhamraAdani Port, GAIL and

IOCL5 2021

Jafrabad Swan Energy 5 2020

HaziraUltra LNG Limited and

Essar Bulk Terminal4 2020

Total 29

Existing Regasification Terminals

Upcoming Regasification Terminals

▪ Approximately 30 MMT LNG

regasification terminal is under

development in India

▪ 4 terminals are on land based – Ennore,

Mundra, Dhamra and Chhara

▪ One FSRU – Jafrabad

▪ One FSU + Land based at Hazira

Hub Spoke Model and Small Scale LNG

▪ Pipeline connectivity to all the demand centers is going to be a challenge

▪ Several small capacity LNG terminals might be a better solution compared to few large terminals

▪ Hub and Spoke model can be implemented where one large terminal will cater to a large demand

center and also provide transshipment facility for few smaller terminals.

▪ Bangladesh and Sri Lanka market can also be captured through hub and spoke model

▪ Road movement of LNG for smaller distance will be another source of transportation of LNG

LNG as auto fuel and bunker – potential demand centre

▪ With tighter emission rules for the maritime sector from 1st January 2020, potential to use LNG as

bunker fuel is increasing.

▪ Antwerp, Amsterdam, Rotterdam, Zeebrugge and Stockholm ports already have LNG bunkering

infrastructure. LNG can be bunkered at several Norwegian ports.

▪ LNG prices are almost same as that of fuel oil hence shifting into LNG will not lead to additional fuel

cost, however, ship engines need to be modified

▪ LNG is better than CNG due to its higher density hence larger quantity can be stored in the

automobile fuel tanks

▪ LNG and solar powered vehicles are solution for the future transportation as they are cleaner

compared to other fossil fuels

▪ India consumed 76 MMT of diesel during 2016-17

▪ Demand of diesel has increased at CAGR of 3.3% during last 5 years

▪ Assuming similar trend in future diesel demand is expected to be 90 MMT by FY 2022

▪ If 25% of diesel in FY 2022 is replaced by LNG, LNG demand will increase by 22 MMT which is

higher than the current import of LNG in the country.

LNG as Auto Fuel Infrastructure Required

▪ Due to cryogenic state, LNG cannot be moved through pipelines for longer distance

▪ LNG movement will require separate infrastructure in terms of LNG depot and LNG

filling stations

▪ For economical movement of LNG to the depots, LNG can be moved by railway through

pressurized double walled tanks

▪ LNG can also be moved by LNG semi trailer and LNG iso-containers

13

Chabahar Port

HaziraPort

LNG Financing

Important factors for financing of LNG Infrastructure:

▪ Long term take or pay contracts with customers providing revenue visibility and

stable cash flows resulting in financial viability of the project

▪ Lower LNG prices are critical for financing of LNG projects

▪ Indian market is highly price sensitive

▪ Many industries like power cannot afford high LNG prices as they have to

compete with alternate sources of energy like coal, solar etc.

▪ Lower cost and longer duration loan are critical for sustenance of LNG infrastructure

projects

▪ Procurement of equipment from established vendors with past track record to ensure

quality and reliability of the LNG infrastructure