ENERGY CONCLAVE 2006 PRESENTATION ON MULTIPARTY INTERESTS IN THE GAS SECTOR 26 TH 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 – 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 Industry : 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 Players BEFORE – ONWARDS UPSTREAMONGC, OIL, ASSAM OIL GAIL, IOCL, BPCL, GSPC, RELIANCE, HOEC, TATA PETRODYNE, ENPRO, SHELL, TOTALFINA, BRITISH GAS, BRITISH PETROLEUM, NIKO, CAIRN MIDSTREAMGAIL, ONGC, OIL GAIL, OIL, GSPL / GSPC, GGCL, AGCL, TNGCL, GCGSCL GAIL, GSPL, BG, OIL, GSPC, GGCL, AGCL, TNGCL, PLL, SHELL, RELIANCE ETC. DOWNSTREAMGAIL, 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

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 Joint Ventures Import of LNG Total sale In 1995Present CURRENT SUPPLY SCENARIO

SUPPLY AUGMENTATION AT COMPETITIVE PRICES CREATING INFRASTRUCTURE - KEY FOR DEVELOPING GAS MARKETS IN INDIA Estimates for MMSCMD Current fields55 New Discoveries40 CBM10 Sub Total Domestic105 LNG Import60 Cross Border P/L20 Total Supplies185 Total Demand300 Total Shortfall115 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* HAZIRA 2.5 mmtpa DABHOL 5 mmtpa KOCHI 5 mmtpa Gas Supply Augmentation

LNG TO BECOME A SIGNIFICANT LONG-TERM SUPPLY SOURCE LNG share to grow from 11% in to 38.4% by MMTPA of LNG already tied up for 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

LNG Existing (7.5 MMTPA) Transmission Pipelines Existing (6,300 Kms) JAGDISHPUR PHOOLPUR BHATINDA JAMNAGAR BAREILLY DISPUR DELHI AGARTALA BARODA SURAT KANPUR LUCKNOW PATNA AHMEDABAD RAJKOT KOTA MATHANIA GWALIOR VIJAIPUR INDORE UJJAIN AGRA KOLKATA GAYA BOKARO VARANASI JHANSI Iran-Pak-India Pipeline Turk-Afg-Pak-India Pipeline DAHEJ I & II 10 mmtpa* HAZIRA 2.5 mmtpa DABHOL 5 mmtpa COCHIN 5 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/ CNG Existing (10 cities) Planned (28 cities, US $ 2 Billion) Gas By Sea Receipt (Likely Location) LNG Terminal COIMBTORE MANGLORE MUMBAI BHUBANESHWAR KRISHNAPATNAM NELLORE CHENNAI TUTICORIN TIRUCHCHIRAPALLI PUNE BHARUCH DABHOL HASAN BANGLORE KOLHAPUR HYDERABAD 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 ( ) 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 ($ / mmbtu) and market price ($ / 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 Issues UPSTREAM 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

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