F India’s Energy Challenge June 28 & 29, 2006, Hilton Americas, Houston Panel Session 3B LNG/GTL Amos Avidan

F 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?

F World primary energy consumption BP Statistical Survey 2005 Oil Natural Gas Nuclear hydroCoal More of the Same…

F Reserves/Production ratios are steady - The role of technology Natural GasOIL BP Statistical Survey 2005 year R/P years Consumption, m bbl/dConsumption, bcf/d

F 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?

F Global Warming Concerns Global climate is complex but there is scientific consensus that human activity is causing global warming – CO 2 increased from 280 to 370 ppm in the past 200 years It’s hard to balance economic growth with CO 2 reduction – new technologies can help Major CO 2 emitters are not bound by Kyoto, but some form of CO 2 controls will likely happen

F The Future 1.Ecological disaster? 2.The Fun Future – techno fix? 3.The Ecotopian Solution? The Future According to Robert Crumb, 1998

F Liquefied Natural Gas High LNG demand to continue –Ample and cost-effective, but remote gas reserves

F $US / ton per annum of capacity But LNG Construction Costs are Increasing Range of recent proposals and bids

F 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

F Cost Escalation Record high prices for commodities, volatility Higher shop loads lead to: –Quality concerns –Higher contingencies –Shorter validity periods Typical Price increases from 2003 to 2006 Compressors:35%Line pipe: 70% Pumps:55%Switchgear: 20% Exchangers:42%Structural steel: 52% Columns 52%

F Shop Loads and Lead Times Early commitment needed Typical Lead times, weeks: Air coolers Motors Columns Vessels Reactors Pumps 25 33

F People Issues Facing the E&C Industry Aging workforce Retaining talent High recruitment Salaries are rising Training is more critical Globalization

F FeasibilityFEEDEPC  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

F 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

F 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

F Thank You