ENERGY CONCLAVE 2006

PRESENTATION

ON

MULTIPARTY INTERESTS IN THE GAS SECTOR

26TH JULY 2006

Presentation outline

• Indian Gas Sector – A Few Snap Shots

• Gas Sector Dynamics

• Issues

Indian Gas Sector – A Few Snap Shots

Indian Gas Industry

• Before 1995

• 1995 – 2004

• 2005 onwards

Three Distinct Phases:

Indian Gas Industry

Before 1995 :• All Sectors were controlled by Govt.

of India

• Administered Gas Price

• Only State Enterprises were involved

• Gas Sale was only to designated consumers

• Importance of clean fuel

• Acceptance of gas as ‘Green fuel’

Indian Gas Industry1995-2004 :

REFORM PERIOD• Acceleration of Industrial Growth

• Awareness on Energy efficiency measures

• Launch of NELP

• Import of gas under “OGL”

• Phased Dismantling of APM

• Increase in Gas Production

• Increasing Demand-Supply Gap

• Foreign participation up to 100%

• World class gas discovery in year 2002 in

KG basin

Indian Gas Industry

Beyond 2005•Market Driven Regime

• Implementation of PNRB Bill

•Gas Pipeline Policy

•City Gas Distribution Policy

•Cross Border Pipeline

•Monetization of CBM

•LNG Regasification terminal

•Procurement of LNG spot cargo

Gas Sector PlayersBEFORE 1995

1995 – 2004 2005 ONWARDS

UPSTREAM ONGC, OIL, ASSAM OIL

GAIL, IOCL, BPCL, GSPC, RELIANCE, HOEC, TATA PETRODYNE, ENPRO, SHELL, TOTALFINA, BRITISH GAS, BRITISH PETROLEUM, NIKO, CAIRN

GAIL, IOCL, BPCL, GSPC, RELIANCE, HOEC, TATA PETRODYNE, ENPRO, SHELL, TOTALFINA, BRITISH GAS, BRITISH PETROLEUM, NIKO, CAIRN

MIDSTREAM GAIL, ONGC, OIL

GAIL, OIL, GSPL / GSPC, GGCL, AGCL, TNGCL, GCGSCL

GAIL, GSPL, BG, OIL, GSPC, GGCL, AGCL, TNGCL, PLL, SHELL, RELIANCE ETC.

DOWNSTREAM GAIL, ASSAM GAS, GUJARAT GAS, AGCL

IOCL, HPCL, BPCL, MGL, IGL, GSPC, ONGC, SHELL, RELAINCE, BG ETC.

GAIL, IOC, BPCL, OIL, GSPC, ONGC, CAIRN, NIKO, SHELL, TOTALFINA, BG, RELIANCE, IGL, MGL ETC.

Gas Sector Regulation In India

Petroleum and Natural Gas Regulatory Board Act, 2006 enacted

REGULATIONS AND POLICIES TO PROMOTE INVESTMENTS AND COMPETITION

INDEPENDENT REGULATORY BOARD FOR DOWNSTREAM SECTOR

• Open Competitive Bidding• Non-discriminatory Open Access• Uniform Regulated Tariff

Storage, Regasification, Marketing of LNG / NG

• No Licensing ; Simple Registration• Free Market Price

• Open Competitive Bidding• Exclusivity Period

• 100 % FDI Permitted in- Pipelines/ LNG/ Marketing & Trading

• Fiscal Incentives Under Consideration- 0% Custom Duty on LNG imports- Infrastructure Status for Gas Pipeline

City Gas Distribution / CNG

Pipeline Transmission

Regulations to be guided by Govt. Policies

Gas Sector Dynamics

231185 166

313263

216

0

50

100

150

200

250

300

350

2006-07 2011-12

HV-2025 Optimistic ADB Gas Master Plan

HV-2025 Conservative

MMSCMD

Potential Demand Scenarios

India – Potential Growth Hub In Natural Gas Sector In The Region

Indian Natural Gas Scenario

MMSCMD

Indian Gas Industry

ONGC & OIL 40-45 55.0

Joint Ventures 0.0 21.0

Import of LNG 0.0 19.0

Total sale 40-45 95.0

In 1995 Present

CURRENT SUPPLY SCENARIO

SUPPLY AUGMENTATION AT COMPETITIVE PRICES CREATING INFRASTRUCTURE - KEY FOR DEVELOPING GAS MARKETS IN

INDIA

 Estimates for 2011-2012

MMSCMD

Current fields 55

New Discoveries 40

CBM 10

Sub Total Domestic 105

LNG Import 60

Cross Border P/L 20

Total Supplies 185

Total Demand 300

Total Shortfall 115

Demand - Supply Gap

CHENNAI

KOLKATA

KAKINADA

DABHOL

PUNE

DAHEJ

VIJAIPUR

BHUBANESHWAR

VIZAG

TIRUCHCHIRAPALLI

HAZIRA

KOCHI

A 1 BLOCK, MYANMAR

KRISHNAPATTANAM

TURKMENISTAN

IRAN

MYANMAR

BANGLADESH

NEW GAS DISCOVERIES

LNG TERM’s- Upcoming

LNG TERM’s- Existing

TRANS – NATIONAL P/L

CBM

MUMBAI

JAMNAGAR

MANAPPAD

DAHEJ I & II

10 mmtpa*

HAZIRA2.5

mmtpa

DABHOL5 mmtpa

KOCHI5 mmtpa

Gas Supply Augmentation

LNG TO BECOME A SIGNIFICANT LONG-TERM SUPPLY SOURCE

LNG share to grow from 11% in 2005-06 to 38.4% by 2009-10

12.5 MMTPA of LNG already tied up for20-25 yrs

10 MMTPA of LNG to be tied up

LNG Supply Augmentation

Key Drivers For Emerging Market

• Govt. incentives

• Increase in Gas Production & LNG Import

• Import of gas through pipelines

• Development of CBM and Coal Gasification

• Regulatory Bill implementation

• Unbundling of transmission business

• Power Sector Reforms

• Concern for Environment

• Growth in Auto/City Gas Markets

LNGExisting (7.5 MMTPA)

Transmission PipelinesExisting (6,300 Kms)

JAGDISHPUR

PHOOLPUR

BHATINDA

JAMNAGAR

BAREILLY

DISPUR

DELHI

AGARTALA

BARODASURAT

KANPUR

LUCKNOW

PATNA

AHMEDABADRAJKOT

KOTA

MATHANIA

GWALIOR

VIJAIPUR

INDORE

UJJAIN

AGRA

KOLKATA

GAYA

BOKARO

VARANASIJHANSI

Iran-Pak-India Pipeline

Turk-Afg-Pak-India Pipeline

DAHEJ I & II10 mmtpa*

HAZIRA2.5 mmtpa

DABHOL5 mmtpa

COCHIN5 mmtpa

MYANMAR-India Pipeline

A 1 BLOCK, MYANMAR

Upcoming (15 MMTPA , US$ 1.5 Billion)

Planned (8,400 Kms, US$ 4.5 Billion)

City Gas/ CNGExisting (10 cities)

Planned (28 cities, US $ 2 Billion)Gas By Sea Receipt (Likely Location)

LNG Terminal

COIMBTORE

MANGLORE

MUMBAIBHUBANESHWAR

KRISHNAPATNAM

NELLORE

CHENNAI

TUTICORIN

TIRUCHCHIRAPALLI

PUNE

BHARUCH

DABHOL

HASANBANGLORE

KOLHAPURHYDERABAD

SOLAPUR

RAJAMUNDRY

VIJAYAWADA

DAMRA

KOCHI

KANJIRKKOD

TOTAL INVESTMENT – US$ 8 Billion

AURAIYA

GAS SECTOR INFRASTRUCTURE:

CURRENT AND FUTURE – A COMPOSITE PICTURE

Issues

Gas Pricing: The Changing Phases

PRICING – MOVING TOWARDS DEREGULATION

Future

• 60% Government

Controlled

- Power, Fertiliser,

Small Customers

• Multiple Prices (US$ 2 – 10 / MMBTU)

- NOC’s – Administered

- Private – Market Related

- RLNG – Market Related

• Free Market Pricing

• Competitive to alternatives

• Alignment with global trends

Present(2005-2006)

Past(Pre 2004)

• 100% Government

Controlled

• Single Price for

all users and sources

• Cost plus basis

Pricing Issues

• Demand for Gas is predominantly price sensitive

• Major gas consumers end product pricing is either regulated or highly price sensitive e.g. Power, Fertilizer

• Substantial gap in APM price ($ 1.75 - 2.10 / mmbtu) and market price ($3.00 - 9.00 / MMBTU)

• Gas price should not be under regulation which may dampen new exploration / market discoveries

• Selective consumer segments like domestic gas for Below Poverty Line (BPL) could be compensated through State instead of regulated gas pricing

Key IssuesUPSTREAM• Incentivize E&P

• Restructuring of PSC i.e. Recovery of cost petroleum

• Share of Profit Gas• Rationalisation of work commitment

• Infrastructure development for monetization of gas

MIDSTREAM•Gas Grid Development•Need for a realistic pricing•Development of gas trading hubs /

Storages

DOWNSTREAM•Long term supply commitment•Rationalisation of Tax / Levis

THANK YOU