Gas Marketing and Trading in IndiaGas Demand Forecast- Impact of Low prices & Contract Review

Alok K Roy, Sr Manager,

Business Development(Gas)

Corporate Office, New Delhi22nd July 2016

Natural Gas – World Overview

Indian Gas Market

Gas Market Development – Imperatives

Gas Price and Demand

Natural Gas Infrastructure in India

Remedy

Contents

Natural Gas – World Overview

3

Gas – A Cleaner Alternative

Source : BP Statistical Review of World Energy June 2016 & IEP

World

2015

India

2030 By energy source, gas to

account for the largest increase

in world primary energy

consumption

To act as bridge between Fossil

Fuel and Renewable Energy

To challenge

• Oil in Transport Fuels &

Domestic Households

• Coal in Power Generation

Has a large resource base to

support growth through 2040

and beyond.

BRICS Nations – A Comparison

Year Brazil Russia India China South Africa

2004 102 2706 30 32 46

2008 130 2931 36 63 77

2010 137 2899 51 83 77

2012 159 2907 47 112 84

2014 195 2864 40 138 92

2015 197 2717 39 144 91

Source: BP Statistics 2016 & World Bank Population Data

Per Capita Natural Gas Consumption (Cubic Meter)

5Gap – 104 MMTPA

Indian Natural Gas Market 6

Indian Growth Scenario – Gas & Oil (% & Mtoe)

Source : BP Statistical June 2016

119 128145 155

174 181 196

29 34 3755 52 46 46

2004 2006 2008 2010 2012 2014 2015

81 79 79 74 77 80 81

19 21 21 26 23 20 19% Share

(Oil + Gas)

Mtoe

Gas

Oil

Gas

Oil

at peak of KG D6 Production

Gas readily substitutes liquid fuels when there are no availability

constraints

Gas Growth Scenario – Domestic & LNG (% & MMT)

Source : BP Statistical June 2016

22.2 22.3 23.2

37.5

29.523.1 22.2

2.06.1 8.4 9.3

14.3 15.4 16.3

2004 2006 2008 2010 2012 2014 2015

9279 74 80

67 60 58

821 26 20

33 40 42% Share

MMT

LNG

Domestic

LNG

Domestic

LNG imports continue to increase - Limited only by infrastructure

constraints (Terminal & Pipeline connectivity)

9

Gas Prices and Demand

GAS PRICING

Domestic Gas

Notified by GoI., Revised every 6 Months.

Linked to weighted average of Global prices – Henry Hub, Alberta Hub, NBP UK & Russia Gas Price.

Imported LNG

Market determined

Based on type of Contract

Long Term / Short Term / Spot

10

NATURAL GAS MARKET DEVELOPMENT :IMPERATIVES

Availability

Domestic

Imported - RLNG

Spot/ Short/ Medium/ Long Term

Trans-border pipeline

Accessibility

Gas Pipelines

LNG Terminals

Affordability

Demand Projections - Un Constrained

114 136 152 177 20157

71104

107111

76

93

99106

118

24

33

4251

63

60

67

68

73

73

26

26

26

29

33

0

100

200

300

400

500

600

700

FY16 FY18 FY20 FY22 FY25

Petchem

Refinery

CGD

Industry

Fertilizer

Power

357

426

491

543

599

Source : CRISIL Report for IndianOIl

MMSCMD

Effect of Price on Demand

5971

4429

3631

40

42

79

16

15

24

11

13

2021 27

22

0

20

40

60

80

100

120

140

160

2009-10 2010-11 2012-13 2014-15

Others

Sponge Iron

Petrochemical

Refinery

CityGas Distribution

Fertilzer

Power

Power Sector consumption fell due to drop in domestic gas production

LNG failed to grab the demand due to higher prices and infrastructure

limitations

Source : PPAC, Infraline

Sector Wise Natural Gas Consumption: April, 2016

43

3219

43

1

138 MMSCMD

23

26

11

10 0

20

68

33

1

Domestic - 71 MMSCMD

LNG - 67 MMSCMD

Fertilizer

PowerCGD

Petrochemicals/

Refineries &

Others

Sponge Iron

Fertilizer

Power

CGD

Petrochemicals/

Refineries & Others

Sponge Iron

Fertilizer

Power

CGD

Petrochemicals/

Refineries & Others

Sponge Iron

Source : PPAC, Infraline

Higher prices kept LNG share lowest in Power

Sector

0

20

40

60

80

100

120

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2011 2012 2013 2014 2015 2016 (till May)

Japan LNG CIF NBP, UK Henry Hub JCC Brent

15

Drop in Global Gas prices

Source: WoodMac LNG Tool – May, 2016 and BP Statistics - June, 2015. 2016 figures are approximate.

$/MMBTU$/BBL

Global LNG Demand Supply Balance: (MMTPA)

255

322

369

421

512

564

329

413

622

672

623

395

521 520

467

200

300

400

500

600

700

2016 2018 2020 2025 2030 2035

LNG Demand

LNG Supply (Possible + Speculative)

LNG Supply (Possible)

Source: WoodMac LNG Tool. Apr. 2016

More than 100 MMTPA of LNG Terminals under construction in US & Australia

LNG Market is expected to be surplus till 2025

Contract Price Reviews

Drop in spot / short term prices triggered

Long Term Contract price renegotiations

PLL – RasGas renegotiated Long Term

LNG Prices resulting in fall of prices from

12$/mmbtu in Dec., 2015 to 6$/MMBTU

in Jan., 2016

CNPC has reportedly taken up price

revision in its Long Term Contract with

Qatar.

PLL is taking up revision of its Gorgon

Long Term Contract.

LNG prices are expected to be

depressed till 2020 even if oil prices

recovered.

14.5

13.8

13.5

12.8

12.5

2012 2013 2014 2015 2016

Drop in Speculative LNG Price slope

Impact on Demand

18

In contrast to rest of the World, India’s Gas Consumption dropped in recent

past due to constraints in gas infrastructure and high LNG Prices

Recent drop in LNG Prices had made Gas affordable in all the sectors including

Power Sector.

This was evident in the March, 2016 e-tender for Power Plants where

companies quoted negative bid for subsidy from Power System Development

Fund

Import Infrastructure constraints are also expected to be resolved sooner with

expansion of PLL Dahej Terminal and completion of new Terminals in West and

East coast.

With environmental and economical benefit in using Gas, demand is expected

to grow in coming years.

Natural Gas Infrastructure in India

20

Terminal 2017 2022 2030

Dahej 15.0 15.0 20.0

Hazira 5.0 5.0 10.0

Dabhol 2.0 5.0 5.0

Kochi 5.0 5.0 5.0

Mundra 5.0 7.5

Ennore 5.0 10.0

Jafrabad 5.0 10.0

Kakinada 6.5 6.5

Dhamra 5.0 5.0

Jaigarh 5.0 5.0

27 50 70

Kochi

Ennore

Dabhol

Hazira

Dahej

Mundra

Jaigarh Kakinada

Dhamra

Operational

Under Construction

Proposed

Under Planning

Indian LNG Terminals (Existing & Proposed)

inMMTPA

Jafrabad

20

Existing

Transmission Pipelines

Existing – GAIL & GSPL

Upcoming

GAIL’s Planned Pipeline

RIL’s East West Pipeline

Pipelines awarded by PNGRB

LNG Terminal

INTEGRATED GRID TO LINK ANY SOURCE TO ANY MARKET

JAGDISHPUR

PHOOLPUR

BHATINDA

BAREILLY

DISPUR

DELHI

AGARTALA

BARODA

LUCKNOW

PATNA

AHMEDABAD

RAJKOT

KOTA

MATHANIA

GWALIOR

UJJAIN

AGRA

KOLKATA

GAYA

BOKARO

JHANSI

DAHEJ

15 mmtpa

HAZIRA

5 mmtpa

COIMBTORE

MUMBAI BHUBANESHWAR

NELLORE

CHENNAI

TUTICORIN

TIRUCHCHIRAPALLI

HASANBANGLORE

KOLHAPUR

SOLAPUR

KAKINADA

(MALLAVARAM)

DABHOL

5 mmtpa

KANJIKKOD

AURAIYA

GOA

CUTTACK

VIJAYPUR

KANPUR

NANGAL

GURGAUN

PUNE

BHARUCH

SURAT

HYDERABAD

RAJAMUNDRY

BHOPAL

KOCHI

5 mmtpa

BARMER

Natural Gas Pipelines – An Emerging Grid

BHILWARA

SRINAGAR

jAMMU

MEHSANA

PARADIP

RAIPUR

NAGPUR

JALGAON

Bidding stageSRIKAKULAM

EOI stage

Gas Demand Projections VsExpected Domestic Gas & Import Capacity

126 132 138 158 149

104132

167177 177

30 30

357

426

491

543

599

0

100

200

300

400

500

600

700

FY16 FY18 FY20 FY22 FY25

Pipeline Imports Import Capacity Gas Supply Gas Demand

Source : CRISIL Report for IndianOIl

MMSCMD

Gas Pipeline Density Km / 100 Sq Km.

5.57

1.39

0.51 0.48

0.00

1.00

2.00

3.00

4.00

5.00

6.00

U.S. Pakistan China India

Transmission Network

Km per 100 Sq Km

Year : 2014. Data excludes Distribution Network

15.0 14.3

18.75

16.00

21.520.3

18.75

16.00

Napt, 17.05

HSD, 19.61

LPG,15.69

FO, 10.82

Napt, 25.45

HSD, 29.54

LPG, 24.53

FO, 16.58

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Brent 13.5% Brent 12.5% Henry Hub $7 Henry Hub $5 Brent 13.5% Brent 12.5% Henry Hub $7 Henry Hub $5

Brent – 13%

24

Affordability(Landed Price at Gujarat, $/MMBTU)

Brent - 100 USD /BBL(August, 2014)

Brent - 60 USD /BBL(April , 2015)

Remedy

25

Removal of Infrastructure bottleneck to take advantage of low price regime

Timely completion of Project.

Regulatory control to ensure logical commitment

Substantial penalties in case of failure, to stop players in becoming bottleneck

Powerpoint Templates

Working together for a better tomorrow…,

Thanks